What’s the best way to invest — deposits, securities, real estate, or your own business? Most advice tends to be fairly abstract. The most effective way to build financial literacy is through practical experience and real-life case studies. Business owners, top executives, investors. In our new Smart Money section, we speak with individuals like these — about their successes, failures, insights, and the decisions that helped them achieve financial independence. Our today’s speaker is Andrii Gorokhov, CEO of the investment firm umgi, which operates under a private equity model, partnering primarily with medium-sized businesses across European markets.
When did you start investing? What advice would you give your younger self?
– I became interested in coins at the age of seven and eventually took up numismatics. This hobby helped me learn about history while earning money. Those are the fundamentals that shape future choices. I never became a doctor, astronaut, or engineer. Instead, I became a manager entrusted with investors’ capital, helping businesses grow both in Ukraine and abroad.
Name some books that may have changed your views on money. Why did they impress you?
For children, I recommend “The Psychology of Money” by Morgan Housel. It uses very accessible language to explain the importance of cultivating a healthy relationship with money from an early age.
I also suggest David Rubenstein’s “How to Invest and How to Lead: Wisdom from the World’s Greatest CEOs, Founders, and Game Changers” (which is definitely available in Ukrainian). Rubenstein is the co-founder and board member of The Carlyle Group, one of the world’s largest private equity funds. He’s not only an outstanding investor, but also a gifted interviewer, philanthropist, and thinker with deep insights into capital, leadership, and long-term strategies. As of mid-2024, Forbes estimated Rubenstein’s fortune at USD 3.7 billion.
I also recommend subscribing to his YouTube channel (https://www.youtube.com/c/DavidRubenstein), which features thoughtful conversations with many of the world’s most influential figures.
Also worth reading is Theodore Dreiser’s “The Desire Trilogy” (“The Financier”, “The Titan” and “The Stoic”) — a literary classic that explores how investments are made, businesses are built, how investors live their lives, what the mistakes they make, how they expand into new markets, and what happens to a business and its capital when local partnerships are mismanaged.
The next book is “Good To Great: Why Some Companies Make The Leap and Others Don’t” by Jim Collins. It is essential for understanding how to transform a good company into a truly great one.
I also recommend “Mastering Private Equity” by Claudia Zeisberger. It’s a well-structured, insightful guide to the world of private equity.
Who is the best investor in the world, in your opinion? Why?
I will answer in a philosophical way. Some people do their job well but prefer to remain in the shadows. There are tens of millions of such investors in the world, yet they remain unknown.
That said, some investors seek the widest publicity possible. Perhaps their business model involves publicity as a tool for attracting capital.
Some are thrilled to share their experience. David Rubenstein is the second type. The founders of the world-famous Berkshire Hathaway, Charles Munger and Warren Buffett, are also that type. They are known around the world. These people are strong referential role models.
However, the assumption that only those publicly “promoted” can be a role model is mistaken. With more than 20 years of professional investment activity behind me, I have met hundreds of entrepreneurs whom I consider my teachers, as they have built breathtaking business models. You don’t have to look far to find such people — just take a closer look at our Ukrainian context.
I would highlight the following as advice to novice investors. Advice number one. If you start investing in a field unknown to you, and your activity is based on trust alone, we compare this to playing in a casino. If you wish to invest, you should make time to learn the details of what you are putting your money into.
There are many better ways to lose your money — for instance, playing in a casino or simply spending it on travel or clothes.
Experienced investors recommend: if you don’t have time to figure out where to invest, then it is better to invest in your first home, never mortgage it, and always keep it out of any risk.
The next piece of advice: when acting as a retail investor in a new business, you should never mortgage corporate rights or assets of your other businesses that have good standing and generate income.
What investment decision brought you the most money, and what did you learn from that experience?
— First of all, it was an investment in myself. I study constantly. There are large libraries wherever I work. I prefer books.
When I was 30, I invested in education at INSEAD Business School and earned an Executive MBA (a degree in business). It was my best investment — worth about EUR 120,000.
My next investment in education was the Executive MBA program at Harvard Business School, worth about USD 70,000.
Which investment decision caused you to lose the most money, and what conclusions did you draw?
I once reviewed an investment project that would allow me to utilize the capacities of electricity producers, including for cryptocurrency mining. Later, we abandoned this idea. However, I invested some of my funds in crypto, though I lacked understanding of this market. Then came the so-called “crypto winter,” when cryptocurrency prices fell. I lost interest and sold the crypto, suffering losses of several tens of thousands of dollars. Over time, cryptocurrency prices rose. For example, today Bitcoin costs about USD 110,000. I got rid of it when it cost USD 5,000.
Later, I invested in a field I understand — numismatics — and the proper investments compensated for my losses in cryptocurrency. Still, this case once again confirmed the rule that investing in an asset you don’t understand is a casino game.
Finally, of course, you should diversify your investments.
What would you never invest in?
Illegal assets. Even if they promise high profitability. Breaking the law inevitably brings major challenges in other areas of life. It’s not worth it.
I also won’t invest in anything not accepted by society, even if it’s legal and there’s demand for it. For example, I won’t invest in establishing casinos or gambling.
I won’t invest in the consumer credit business. Although this is a legitimate model operating globally, it should be noted that only people in distress take such loans at cruel rates. Then come tragedies.
I will also never invest in the arms industry. However, watching drones reshape the theater of war, I would invest my money in UAVs for the Ukrainian army.
I haven’t formed a definite opinion on industrial hemp yet. Still, having reviewed the market, I’ve realized that hemp — when it isn’t demonized — is about clothing. Moreover, it can replace cellulose, which is no longer produced in Ukraine. Still, I will not invest in medicinal hemp.
Which of your investments was pure luck, not a calculation?
Once, I invested USD 9,000 in an altcoin cryptocurrency. A few years later, the asset’s price increased dozens of times. It was more luck than the result of calculation. Still, I don’t recommend investing in anything you don’t understand.
It’s worth noting that an investment is only deemed complete when the cash is credited to your account. Unless you receive the cash, the financial result is not confirmed, as cash is the start and the end of an investment. This applies especially to cryptocurrency investments.
In your opinion, what is the formula for success in investing?
You should get rid of whatever is unnecessary and not directly related to investments, and you’ll find the saved funds in your wallet.
The structure of the capital you invest should allow you to sleep as peacefully as possible and not lose your health. The very first asset worth investing in is your health. It is even more important than investing in education.
In your opinion, what assets in Ukraine are worth investing in during wartime with minimal risk?
There is no risk-free asset class in the world. No matter what country you invest in, there are risks everywhere.
I should note once more. First of all, I would invest in health. Then — in education.
Next, you should invest in close people. Moreover, you must make sure that the investment is satisfactory. If not, be sure to invest, as it is part of your ecosystem.
As for the assets that Ukraine offers for investment, I will emphasize once again that you should understand the field you are entering.
For example, if you have USD 5,000 but no desire to learn where to invest, and if you are not ready to entrust the management of your funds to anyone, put them in a “piggy bank.”
By the way, do you have a “piggy bank”?
No, I don’t.
Do you think you do not need it?
If you wish to have accessible liquidity, you can entrust your money to several banks. It is better not to keep valuables at home, namely because of the risk of robbery. My advice is to keep small amounts at home that are of no interest to “professional players in the robbery market.”
Thus, I do not keep valuables at home and forbid all my relatives to do so.
I assume it is normal for some people. The only advice is to diversify the funds in your “piggy bank” by currency.
Therefore, the “piggy bank” remains one of the possible savings instruments. However, think carefully about the amount and the currencies to keep, and whom to tell about it.
For those who trust banks (I do), I recommend investing in different currencies across several banks.
I do not recommend looking for higher interest rates. An aggressive “game” with interest rates may be a sign of the bank’s liquidity issues.
The next recommendation is to consider bonds: state or private, Ukrainian or foreign. You should understand the area. I do not recommend entering the bond market if you lack an understanding of its specific characteristics.
You may also consider investing in companies that you know. If possible, I would recommend entering the business with small shares at first. Later, you can increase your investment, being an insider in the company. I do not recommend investing in a business based on friendly relations. Any investment decision should be based on a meticulous analysis of the business. That said, you should constantly keep your finger on the pulse and not blindly trust friends or partners.
Next, you can consider the shares of public companies. You should know that there are no guarantees of profit here. Before investing, you should analyze the company’s history: how it pays dividends, what their amount is, and what the value dynamics of the company’s shares are.
Nowadays, Ukrainians have access to the Interactive Brokers (IBKR) tool. It is a public American platform worth USD 40 billion. This platform, as well as many other tools, allows Ukrainians to invest in shares of foreign companies.
As for the Ukrainian stock market, my advice is the same: if you don’t understand it, you shouldn’t enter it. If you do, you should think carefully. I hope the domestic stock market will develop and Ukrainian businesses will be able to use its opportunities in the future. Nowadays, as in the last 30 years, the market has not reached the development stage we would like it to be.
If you wish to invest in shares of foreign companies, you should first decide whether you will engage in this activity yourself or address a professional intermediary. I believe that trusting professionals with a good reputation is the best option. If you wish to invest independently, you should start with small amounts, analyze the profitability of your investment strategies, and make adjustments along the way.
You may consider investment funds, both Ukrainian and foreign. This means more significant investment amounts. If you invest in Ukraine, you should focus on large and well-known Ukrainian investment companies. Moreover, there are hundreds of projects in Ukraine implemented via local asset management companies. Still, you should understand the field.
The activities of investment funds abroad are more regulated than in Ukraine. Managers there also make mistakes and fail. Not all private equity funds “play” successfully. However, most do. In the worst-case scenario, they return the nominal amount of the investment. The standard (not the best) option is when funds repay 50% of the return on capital to investors. A good result for such investments starts from 2X. That is, for every UAH 100 invested, you get at least UAH 200 in 10 years. A good fund ensures a return of about 3X. Anything above this figure is a sign of a super fund and super managers.
The only peculiarity is that profitability should be assessed “by cash” — that is, by the amount of money credited to your account based on the investment.
Next are investments in venture funds. The risks are very high here It is recommended not to engage in this matter yourself, but to trust professionals. Several well-known venture funds in Ukraine invest both in Ukraine and abroad. These are “TOLOKA.VC” and “TA Ventures.”
There are a lot of such funds abroad. However, this sector is associated with significant risks. Thus, it is better to invest in the funds, which will then invest in dozens of startups. In my opinion, the profitability of a successful venture fund should start from 5X.
The last options to mention are cryptocurrency and gold. As for crypto, Bitcoin is the most popular option. If you do not understand the market but desire to invest in cryptocurrency, then you should decide on the amount you are willing to lose beforehand.
The gold, which has always been a hedge against currency depreciation, has increased in price by 50% over the past year. Is it a sound investment? — Yes, it is. Can it fall in price? — Yes, it can.
Some Ukrainians invest in agricultural land. I will not criticize such an investment. Agricultural land can be leased. Moreover, most realize that the value of land will increase. This is proven by land prices in European countries. However, you should consider the land location, its fertility, climatic conditions, availability of people willing to rent it and the rent price, the irrigation needs, etc.
Are there any assets in Ukraine not worth investment nowadays?
Both in Ukraine and other countries, you shouldn’t invest in assets you don’t understand. That’s all.
What investments can “take off” in Ukraine after the war, and should we invest there now?
Agricultural land with “proper” location given the climate change factor. Still, you shouldn’t buy expensive plots. That said, I wouldn’t buy cheap land located in the middle of nowhere.
Which word do you associate with money?
Energy, power.
Does money smell?
The Italians proved that 2,000 years ago. Thus, money smells for me.
Is there anything that annoys you about investors?
I like people who create. Investors bring energy in the monetary form to create something new. Therefore, I love and respect investors a priori.
What is the best thing you’ve ever bought for a song?
Health and education advice.
What are your top three pieces of advice for investors?
Always try to understand your motivations for investing in a particular instrument, the risks involved, and not just the opportunities.
Get a thorough understanding of your investment object.
Be ready to learn, including from your mistakes.
Source: delo.ua