Written By: Milja Mieskolainen
Our first event of the new school year combined inspiring information about the Finnish economy and about AIC's Board and how to apply for it. This post reviews the ideas put forward by our speaker Elina Lepomäki, and at the end there are thoughts from a current board member Miikka who is a sixth year student at Aalto.
If I had invested in the Dow Jones Index in 1890, what would be the return I received today? The answer is 77,000%. No one’s investment horizon is likely to be 130 years, but the main point of the question lies in the fact that it’s never too late to start.
The Finnish economy is facing challenging times. Public spending is rising at an accelerating pace, the pain points of the occupational pension system are becoming more pronounced year by year, and the ultimate problem is that pensions have been paid more than the money needed for them comes in. However, the future is not a mere gloom, as, for example, after the next ten years, artificial intelligence and productivity growth are likely to offset other problems in the economy. As the examples described above show, the future of the Finnish economy is a fumbling balance, so personal preparation is more important than ever.
For every euro we pay into the pension scheme, we get about 70 cents back when we retire. And we can't influence it. If we want to compare this figure with something, today’s retirees get back about four euros for every one they paid. What do we learn from this? You should be prepared, and put aside everything you can. Sounds good and simple, but youth unemployment is also high in Finland, and young people suffer from poor job opportunities. Investing is the joke that every euro matters. This is all the more pronounced the younger you start investing, because the interest rate effect is really worth all the attention it gets.
Elina herself became interested in the market and investing through working life. He moved to work in a bank on the market side, where things had to be re-learned even though he had studied them up to a certain limit at school. Thus, practice teaches the most in almost all situations. This was further accentuated when Elina moved to work in London, where she had to retrain the younger ones. Still, it is not worth dropping out of studies.
In addition to the interest-to-interest effect, perseverance is one of the pillars of investing (or quote used too much). Elina gave a personal example of this: With the candy money saved with her brother, she bought Nokia shares, the value of which rose by about 70% in a couple of months. Enthusiastic about this, they took the money they won, and organized a party. However, the share price continued to rise, and six months later would have been able to organize much larger party. Thus, perseverance usually rewards, and the longest possible investment horizon makes retirement day dreams possible. In the case of Nokia, the rise in perseverance would have ended in the fall of 2001, but bubbles usually burst at some point.
It is advisable, of course, depending on the investor, to invest small amounts at least once a month. If a person wants to maintain his or her purchasing power as an investor, he or she should be involved in the stock market, as inflation has earned its reputation for a good reason. In practice, decentralization is worthwhile, because, for example, when investing in the real estate market alone, the investor is exposed to a large amount of risk. Along with other investments, it is usually worth keeping the world index, as it is a fairly good indicator of, for example, Finland's housing policy or technological development.
Finland is a rather poor country economically, as it is about the same level as Slovenia. Many control countries do not have an occupational pension system, and many citizens save for themselves. So this is a general perception. In reality, quite a number of countries have some form of occupational pension scheme, and in some the citizen can decide for himself the risk of investing his pension money. A Swedish household has 2.5 times more net worth than a Finnish one. This is partly explained by the number of “really” rich people and partly by immigration, but even without these differences, the average household in Finland has less wealth.
Feelings from our Board member Miikka (Head of Operations):
Why did you join AIC?
I first heard about AIC in the spring of 2019 when I spotted an ad on Facebook where the club was looking for an event coordinator. I was immediately interested, as organizing events had been close to my heart for a long time, and investing has been of interest since I was little - though I can’t say I was, or still is, particularly experienced or “good” at it. I considered sending an application for a long time, as I had already started my studies in 2015, and I was not honestly sure if there would be enough time and motivation for student activities anymore. However, the interest and enthusiasm eventually won and I decided to apply. When I got to talk to Marko and Silja in an interview, making the decision became really easy when Marko asked me to join in, and I haven’t regretted it in a moment since.
What has been the funniest / best thing in the last year at AIC?
Absolutely the best has been our amazing board. We have become a really close group of friends this year and we have spent a lot of time together not only in the activities of AIC, but also in our free time. We have made several cottage trips and spent countless evenings for cooking, sports or just hanging out in general. Going to volunteer is a great way to get to know people and make friends in a new city, especially for students from outside the Helsinki area.
Is there anything in the AIC that is not obvious?
Many may think that AIC is for business students only or that going to board would require deep experience / knowledge of investing. Neither of these prejudices is true. AIC has not been named Aalto Investment Club without a reason, members from Aalto's various fields are wanted for the board. Investing has nothing to do with business studies, but is a way to save money profitably for retirement, for example, and can be practiced by anyone, regardless of field of study. No one on our board is an investment guru either, and AIC’s idea is not to compare investment portfolios. The idea of the club is to encourage students to start investing at a young age, because the earlier you start, the longer you have time to enjoy the most powerful force in the world: the interest rate effect.
Is this an uptight community?
Being uptight is quite far from the normal operation of AIC, as time is spent mainly on meetings, brainstorming and event planning. You can see both the strategic and the operational side of the event process. Of course, you can also do a lot if you like it - a good example of this was the interdisciplinary Student Investment Summit, where students from different schools got to know each other and network with speakers from different fields.
General feelings, patted applicants, etc. free word
I joined AIC with a pretty strong “one more year” mentality - my goal was to gradually get my master’s thesis finished and leave student activities and AIC to new enthusiastic volunteers. It is amazing to think about all that we have already achieved during the first year of the AIC and I look forward to seeing how future boards can develop the club’s operations and take it to a new level. If you are interested in investing, organizing events or working in a close-knit team, then all I can say is that you should apply!
Board application is open till 30.9. If you have any questions regarding application etc., don’t hesitate to message us on LinkedIn, Facebook or WhatsApp!