See above.

Investors need to study the facts and not just follow the herd

The first half of 2020 was unprecedented in many aspects. A global pandemic no one expected appeared and triggered widespread lockdowns, which quickly brought the global economy to a virtual standstill.

In a short span of several weeks, the S&P 500 along with other major indexes plummeted nearly 30 per cent, ending the longest bull market in the United States.

Millions of Americans lost their jobs, with the unemployment rate reaching the highest level since the Great Depression. Sharp contraction of economic activities also caused a tidal wave of bankruptcies by companies.

While the stock market bottomed out on March 23, US stocks have since staged numerous rounds of powerful rallies.

Despite a recent resurgence of Covid-19 cases and the heightened tensions between the US and China, US stocks finished the second quarter with the best quarterly performance in more than two decades.

A rallying market accompanied by a stumbling economy left many Wall Street veterans perplexed. Analysts at Goldman Sachs repeatedly warned its clients of correction risk in February and May. Their predictions have yet to be proven right.

What is causing the apparent disconnect between Wall Street and Main Street?

DISMAL REALITY VERSUS OPTIMISTIC OUTLOOK

The widespread lockdowns caused record unemployment numbers and drastic contraction of economic activities.

Economic turmoil does not necessarily translate into a market downturn, especially if the turmoil is expected to be short-lived.

Note that the jobless claims are backward looking. The market is a leading indicator of what is to come in the economy. Investors, therefore, should look beyond current data and focus more on the future.

Given so many ongoing uncertainties, the second half of this year is likely to be eventful and volatility will remain high. Trading on short-term forecasts and engaging in market timing - popular with a rising number of day traders - are not investing but speculating.

Many investors think current economic contraction and job losses are self-inflicted by mandatory lockdowns. As states begin to re-open, business activities would pick up quickly and those who were laid off would be rehired.

The recently released strong May employment data lent support to such expectations. Since stock valuations are determined by future corporate earnings, the belief of a robust economic rebound provides justification for a rallying market.

THE FED

The US Federal Reserve has long played an outsized role in global capital markets. When the economy was on the verge of collapsing several months ago, the Fed moved in swiftly and aggressively by pledging unlimited liquidity support through asset purchases and slashing interest rates to near zero.

The aggressive moves by the Fed coupled with trillions of dollars of stimulus measures by the US government helped cushion the devastating blow brought about by the pandemic.

Indeed, analysts in prominent brokerage firms including JP Morgan's Dr Marko Kolanovic expected the Fed policy would more than compensate for the temporary hit to corporate earnings. The unwavering support by the Fed boosted market sentiment and propelled the market forward.

LIQUIDITY

Given ongoing high uncertainty over the pandemic outlook and economic recovery, the market is expecting more stimulus. By many estimates, the monetary injection by the Fed is likely to exceed US$8 trillion (S$11.1 trillion) eventually, which would be more than double the US$3 trillion aid used in the last financial crisis.

Bond yields have been on a steady decline thanks to near zero or negative benchmark rates. Returns on commodities like gold have been volatile and underperforming major stock indexes.

This leaves stocks as a remaining viable option. A tsunami of liquidity coupled with the lack of attractive investment alternatives prompted many investors to bet on equities.

If it were only about ample liquidity, one would expect that the stocks would have gone up across the broad sectors. A deeper dive into the data tells a different story.

NEW ECONOMY

The pandemic has wreaked havoc on bricks-and-mortar retailers and energy sectors. Many household brands like GNC and Hertz have been forced into bankruptcy. A dozen energy firms, including shale pioneer Chesapeake Energy, went under when the pandemic caused the oil price meltdown.

But not all have suffered. The pandemic provided a powerful boost to the businesses of many technology companies. Leading the way are five high-tech heavyweights - Facebook, Amazon, Apple, Microsoft and Alphabet - whose shares have gone up more than 35 per cent since March lows, while many other sectors remain depressed.

With a combined market cap of more than US$5 trillion, the strong performance of the new economy firms is a leading cause for the sustained advancement of the market cap-weighted S&P 500 and Nasdaq, which are influenced most by the performance of the tech giants.

Therefore, the divergence of the new economy and the bricks-and-mortar sectors contributes to the disconnect between dismal economic reality and the rising market.

FOMO

Stocks are determined by the prospect of future corporate earnings. Market recovery leads economic activities. An example is the broad market rally on May 18, in response to favourable vaccine development news.

The market collapse in March resulted in a large cash pile on the sidelines as a result of massive selling. The balance of money market funds ballooned to a near record high of US$4.7 trillion. In the meantime, massive monetary and fiscal measures have boosted the economic recovery outlook, propelling market rebounds.

The fear of missing out (Fomo) on the next big rally led many of those investors who had stayed on the sidelines early this year to return to the market, adding more fuel to power the market forward.

LOOK AHEAD

A previously widely held belief of a rapid V-shaped recovery looks less likely as the number of virus cases continues to rise quickly and the timing of vaccine delivery remains anyone's guess.

Other prominent risk factors include the upcoming US election and the ensuing policy changes as well as rising geopolitical tensions.

Given so many ongoing uncertainties, the second half of this year is likely to be eventful and volatility will remain high. Trading on short-term forecasts and engaging in market timing - popular with a rising number of day traders - are not investing but speculating.

What we do know is the pandemic will go away, eventually. Long-term investors should stay invested and buy the dips selectively if one has excess cash.

Last, but not the least, it is critical to distinguish between good firms and good investments. Good firms with low debt and high earning power may turn out to be bad investments if one pays too much.

As legendary value investor Benjamin Graham famously said, the secret of sound investment is to seek "margin of safety" - the extent of stock price below its value. Therefore, a stock's past high return should never be a reason to buy.

If you plan to return to the stock market, you may want to look at high-quality stocks that are undervalued.

Ms Lorraine Tan, regional director of equity research at Morningstar (Asia), defines such shares as those with positive competitive advantages and comfortable financial positions.

Some well-known examples include Disney in the United States, Fanuc in Japan, Airbus in Europe and Tencent in China. "These companies have built up a formidable business presence that will take competitors time to unseat," she says.

Her picks for companies here that will have competitive advantage of at least 10 years include ST Engineering and the three major banks - DBS Bank, OCBC and UOB.

Although the earnings for all these companies are likely to take a hit this year due to the pandemic, which in turn has affected their share prices, their financial outlook remains positive.

"The balance sheets of the three banks are strong so they can afford to keep their dividends stable. We do have a slight preference for OCBC, however, given a broader earnings base. Similarly, we think ST Engineering will keep its dividend stable despite a drop in its earnings," says Ms Tan.

It's also worth looking at beaten-down commercial real estate stocks that may still be undervalued. For instance, CapitaLand Commercial Trust and CapitaLand Mall Trust, which are slated to merge later this year, are trading at reasonably attractive levels given their risk outlooks.

Ms Tan notes: "We think the phased reopening of activity in Singapore will help provide clarity to the floor that can be anticipated in terms of vacancy rates at properties such as Clarke Quay, which has been more significantly challenged from the closures to restaurants and bars. "Once this is known, we think there will be more confidence by investors to buy these shares."

As this downturn can severely affect even blue-chip companies, investors would do well to do basic research so they won't be caught out in case of missteps by company managements. Ms Tan notes some areas you can look at:

• Expansion plans: If companies are expanding outside of their core business areas or geographies, it is important to see that the management has factored in the risks accurately, has a focused strategy and is disciplined in not overpaying for an acquisition.

• Cash flow: Investors should focus on the sustainability of positive free cash flow and not just net profit. As a gauge, a company's cash from operations should not be negative for a prolonged period and it should also be able to generate positive operating cash flow from sales.

• Business prospects: There may be instances of start-ups that are sustained by funds from investors. But if an established company in a mature business is still dependent on fund injections for a few years, it is an immediately worrying sign.

Companies with low profit margins and higher debt levels will face more uncertainty in an economic downturn. So if a company has a low profit margin, it should be more careful not to gear up too much.

If uncertainty is the order of the day now, should investors wait for clear skies before they start to invest again? They can but this means they may have to wait for a long time. Ask any wealth manager and they will tell you that investment is a necessity and not an option.

Ms Tan Siew Lee, OCBC's head of wealth management, says: "It is very important for people to invest and grow their funds prudently as this will help them to achieve key life goals in future like getting married, buying a home, funding their children's education and preparing for their own retirement in their golden years."

She says the pandemic will hurt the global economy and corporate earnings, but very aggressive and unprecedented support in terms of monetary and fiscal policy from governments has played a key role in global stock markets rebounding from their lows in March and should help in longer-term economic recovery.

With the benefit of hindsight, the global authorities are far more prepared today to deal with a crisis like Covid-19 than they were many years ago. So it makes sense for investors not to panic. They should stay invested but manage risk by investing carefully and staying diversified across asset classes and preferably over time through gradual placements.

If you want to get a peek at how you can get started on this, log on to OCBC's Life Goals digital planner, which allows you to see what kind of financial solutions you need to meet your retirement goals or have enough to pay for your children's education. The financial tool then recommends a portfolio of investments consisting of an allocation of unit trusts and bancassurance products based on your risk appetite.

Ultimately, doing something is better than doing nothing.

"Leaving your money in a bank at current low interest rates makes little sense as you need to beat inflation at the very least, as the cost of living and education and healthcare costs may rise significantly over time," says OCBC's Ms Tan.

Most of us get that bit wiser after an event that causes us to lose money, such as falling for an online scam. Chances are we would never fall for a similar ruse again: Once bitten, twice shy, as the saying goes.

But this rule apparently does not apply to many investors who prefer to believe that tomorrow will always be better.

Otherwise, how do you explain why we keep seeing the same reckless behaviour of folks who try to win in the stock market in the hopes of making it big in every downturn, including the current one. And worse, some people actually jump into the stock market with money borrowed on their credit cards.

The desire to strike it rich has resulted in a strong upswing in stock markets worldwide in recent months even though the pandemic is far from over and countries are braced for hard times ahead.

You would think that after successive shocks to the market in recent memory - the financial crisis of 2008 and the oil price plunge in 2015, people would be smarter with their investments.

The reality is that many choose to take the blinkered approach - they see the current downturn as a chance to get rich by picking up "cheap" stocks while being blind to the fact that the downturn can cause the same stocks to become even cheaper and thus cause deeper losses.

So before you leap back into the game, it pays to be grounded with evergreen investment tips that may save you from financial ruin.

1. Never try to time the market

I had a ringside seat to this phenomenon being played out here during the circuit breaker, which saw many major businesses shuttered.

When the announcement of the tighter lockdown was made on Friday, April 3, I expected a stock in my portfolio, which was already battered down, to dive even more since the shutdown would affect 100 per cent of its business.

I felt a tinge of regret then for failing to sell the stock earlier but I consoled myself that since it was a longer-term investment, I should not be overly concerned with the near-term volatility.

But what surprised me was that when trading resumed the following Monday, the share actually went up. The logical explanation for this unexpected event, in broker-speak, was that the share was already oversold and since the "bad news" was not that bad, the stock recovered.

Its price continued to go up over the following two months after a higher-than-usual dividend was announced, perhaps as an assurance to shareholders that it remains on solid ground.

Had I tried to time the market by selling the share earlier so that I could buy it back at a lower price later, I would have suffered losses because the dip never happened.

2. Invest only what you can afford to lose

Unless you have found a crystal ball that lets you peek into the future, all investments come with risk. For instance, no one could tell back in December that in just three months, the whole world would be "shut down".

So if you invest all your spare cash or, even worse, invest using loans, you can find yourself in dire straits when things turn bad. Even if you can spare $100,000 or even millions, it is better to not invest all at one go but spread it out in tranches. I am very conservative when it comes to investing my hard-earned salary but if my investment has turned in a profit, I will take more risks with the profit because losing a windfall is less painful than losing your own money.

3. Don't follow the herd

The worst thing you can do is to invest based on tips from friends of a friend. Due to the fear of losing out, some people will just buy into a "hot" stock even though they have no clue what the company does.

Then there are those who are very confident because they follow the investment styles of legendary investors who have become billionaires due to their astute skills.

While there is nothing wrong in trying to learn from the best, you must realise that the chances of achieving similar success is almost zero unless you have unlimited cash at your disposal.

A investor with $10 billion can still bounce back with the last billion even if he loses 90 per cent of his wealth. That's why they can afford to invest when the rest of us are scared stiff.

Ask yourself this: Were you busy buying up all the rock-bottom bank stocks during the 2008 financial crisis? With perfect hindsight, many wished they had but the reality was they had no money to do so then.

4. It's nothing personal, it's just business

Some investors tend to get overly sentimental after they hold certain stocks for years. And even when the outlook for the share dips, they refuse to let go, hoping that it will eventually recover its glory days.

Even worse, some shareholders view themselves as loyal customers who will continue to support the company come what may.

The reality is that the management won't even know you have bought its shares unless you show up and shake the boss's hand at the annual general meeting. Even so, unlike customers who have the right to demand refunds for bad deals, investors won't get any compensation for stock losses because they are deemed to be "owners" of the company, albeit small ones.

So if you think it is prudent to cut your losses by selling the stock, do it and get some of your money back.

5. Long term does not mean fire-and-forget

Many people seem to think that a long-term investment means buying a stock or fund, keeping it for years and then all will be fine.

This may be true for some resilient investments but it does not mean you can take your eye off all your long-term investments.

Otherwise, you may wake up one day to find that your portfolio has become worthless simply because the companies have run into financial troubles.

This is especially true now because many firms are facing the twin threats of a severe recession as well as disruption by technology.

If you don't have time to monitor your portfolio, you should stick to less risky products such as government bonds and mark the maturity dates in your calendar.

6. Don't venture into the unknown

You are unlikely to walk into a tour agency, hand over $10,000 and tell the operator to sign you up for a mystery trip.

If you won't buy something without knowing what it is, you should also never invest in something you don't really understand.

For instance, you should remind all the seniors in your households that if all they want is to put their money in fixed deposits, they must never sign up for anything that offers higher rates, no matter how attractive it seems, especially if they do not understand how it works.

Finally, know that money won't just fall out of the sky without you putting in time and effort. So it pays to invest in improving your knowledge first so that you can make informed decisions and bets.

Validus Capital co-founder directs 10% of portfolio in the safe haven, noting the surge in price recently

Like many savvy investors, entrepreneur Vikas Nahata is playing it safe amid the pandemic and opting for the traditionally most secure haven of all - gold.

Mr Nahata has directed 10 per cent of his portfolio into the yellow metal, noting that the price has shot up 15 per cent of late.

"In the midst of a volatile market, I would maintain a position in gold, which is still seen as a safe haven for investment," he adds.

But Mr Nahata, co-founder and executive director of Validus Capital, is still investing in his business - a financing platform for small and medium-sized enterprises (SMEs) that has expanded into Indonesia and Vietnam.

He has already put about $2 million of equity into Validus Capital and expects it to break even in seven years.

The firm, which has about 130 staff, is Singapore's largest peer-to-peer lending platform with $480 million or so already distributed.

It helps firms access financing from individual and institutional lenders, while using technology to minimise the costs. "For Validus, with the strong success in Singapore we have experienced, we have replicated in Indonesia and Vietnam and we're on track to launching our fourth entity in Thailand by the end of this year," says Mr Nahata, 43.

SME lending through the platform still gives him good returns, while he continues to keep a keen eye on his own investments, ensuring that they remain diversified to weather these turbulent times.

Mr Nahata, who is married with a 17-year-old daughter, graduated with a bachelor of science in economics, with a focus in strategic management from the University of Pennsylvania, the Wharton School, in 1998.

Q What's in your portfolio?

A My portfolio has gone through a tremendous change in recent times as with many others. What it was on Jan 1 and what it is today is completely different.

* Worst and best bets

* Q What has been your biggest investing mistake?

A It was around 2007 to 2008 when one of my investment bankers suggested that I look into foreign exchange derivatives. This was a new product I had not earlier invested in. He convinced me to take positions in some currencies and when the financial crisis happened, they fluctuated negatively against my position and I lost almost about 40 per cent of the value of my portfolio in less than three months. It was a big hit for me.

Lesson learnt: Don't try to be too adventurous and invest in products you do not understand. Returns that sometimes look too good to be true, are too good to be true. Leave that to the experts. Stick to investment products you know about because preservation of wealth is more important than looking at returns.

Remember that with every abnormal return, you will carry abnormal risk.

The same goes for cryptocurrency - at the height of its popularity, I made sure to stay away from it and I'm glad that I did. I believe that products which you do not understand and do not follow or study on a regular basis, you should not get adventurous about and put money in because you can get greedy. And when things turn tight, it leaves a void.

To sum up, my investments are about wealth preservation. Wealth creation happens through my businesses.

Q And your best investment?

A Of all the investments I've made locally, Validus remains one of my largest investments in Singapore and my best one to date. Small and medium-sized enterprises are a key contributor to any economy, contributing massively to its gross domestic product while providing stable employment to the workforce.

Besides Validus, it would have to be the decisions I've made for my property business. Between 2002 and 2004, when the middle class in India was rising, I realised that buying land or real estate in India - especially agricultural or industrial land - by going into the fringes of the urban areas, seemed to be a wise choice.

I allocated some investments to buying these lands. I chose not to take any loans because I knew I wanted to hold on to them for at least 10 years. They will not give me any kind of rental yields and I would have to service those loans.

Fast forward 10 years later, every dollar that I invested made a 2,000 per cent return over that period.

Sue-Ann Tan

My average portfolio return prior to the Covid-19 outbreak was around 12 per cent.

Apart from my investments in each of my two businesses, I currently hold about 20 per cent in cash, invest about 15 per cent in SME lending through the Validus platform, hold 15 per cent in equities, 10 per cent in gold and 40 per cent in fixed-income securities.

While returns on equities and fixed income have been volatile, gold has gone up by about 15 per cent and SME lending through Validus still gives me about 8 per cent to 9 per cent.

Q What are your immediate investment plans?

A I intend to increase my exposure to regulated platform SME lending (uncorrelated to current markets) which can offer me about 8 per cent to 9 per cent returns and also gold.

I'll be staying liquid in cash and, as for equities and bonds, I'm going to hold. I would like to invest again in equities by the end of the third quarter when there is more clarity on the impact across broader markets.

In the wake of the pandemic, one should be careful about long-term investments.

Q How did you get interested in investing?

A It happened during my college years at Wharton, where we were taught how to invest in public markets. After graduation, I started working and I took a portion of what I earned to invest in stock and later, bond markets. Since then, I've been investing for over 20 years.

Q Describe your investing strategy.

A I lived by a couple of rules, namely to diversify - it's very important especially in times like now. Don't try to time the market and don't over-leverage your portfolio.

Aim for consistent returns, while keeping cash in hand because opportunities come once in every three years where you can really make abnormal returns but if you don't have cash, you don't have the gunpowder to invest.

Also, I do not invest directly in real estate, start-ups, cryptocurrencies or alternative equity funds.

The reason is I invest in my own active businesses, which do carry risk. My personal portfolio is meant to be low risk and low return.

Q What else is in your financial plan?

A I have a life insurance plan and my daughter is my beneficiary.

Q How are you planning for retirement?

A I plan to retire at age 50 and I would like to continue working and contribute my knowledge and skills as an adviser or mentor. I expect to earn about $300,000 a year in passive income for retirement.

Q Moneywise, what were your growing-up years like?

A My dad is 67 and is still active in managing our agricultural business in India. My mum is 66 and she is an artist and professor. I have a younger sister who is 35 years old.

The family lifestyle was simplicity, which means differentiating your needs and wants. It was very important that we don't spend more than we earn. Maintaining a balanced lifestyle is crucial to cope with bad times when they come our way.

Money has to be respected because if you treat it with disrespect, it will never stay with you. It doesn't make you a more respected or influential person. What you can do in this world with money and what you can help create is most important, rather than how much you spend on luxury or things that you may not need.

Don't get tempted and swayed by what you see around you. That could be folks who spend a lot on brands, I don't recommend you to try and imitate that lifestyle. Stay true to what you believe in, in terms of your spending and spending power.

Growing up, de-cluttering was a yearly exercise. We had to go through our wardrobes and take out at least 25 per cent of things that we didn't need. This helped us to re-evaluate how much we actually need.

Q What does money mean to you?

A It means the power to create and make a difference. That's why I started Validus. Some 80 per cent of SMEs, globally and not just in Singapore, are unable to access bank lending because of collateral requirements and SMEs don't have that.

By building Validus, we want to make life easier for thousands of Singaporean entrepreneurs as well as to help them grow.

At the moment, there's a $20 billion gap in financing and that's what we're focusing on. The companies we've loaned money to so far have grown revenues annually by 20 per cent.

We help both sides of the table - small businesses who need money as well as investors looking to park their funds in new and exciting asset classes. We want to create a win-win situation for everyone involved.

Q Home is now ...

A Home is a rented apartment in Orchard. Hopefully in the near future, I look forward to the possibility of owning a home here.

Q I drive ...

A I don't drive in Singapore because public transport is very convenient and I can always rely on ride-hailing apps to take me from one destination to another easily.

Financial executive Manish Tibrewal reckons investing in property makes a whole lot of sense when you do not have a lot of time on your hands and there are regulatory issues to weigh up.

Mr Tibrewal, chief executive of Maitri Asset Management, also buys into the tried and true convention that location is key to making money in real estate.

"An asset should be located where there is scope for appreciation either due to its rarity value or enhancements in the vicinity," he says.

Mr Tibrewal, whose property assets are largely in Singapore and India, moved here in 2009.

His role at Maitri, which was founded as the Tolaram Group's family office in 2015 before evolving into a licensed asset manager last year, involves helping clients preserve their wealth by creating long-term, sustainable investments and generating opportunities for capital appreciation.

The firm's focus is to work with clients who want to set up a family office here, Mr Tibrewal says, noting that the many regulatory and economic incentive schemes supported by the Monetary Authority of Singapore and the Economic Development Board make the Republic a prime location for such initiatives.

It is no surprise that the 39-year-old Indian national, who is married and has two daughters aged eight and two, firmly believes that people should start saving and investing as early as possible.

He quotes Albert Einstein's comments on compound interest: "He who understands it, earns it. He who doesn't pays it."

This applies not just to interest income but any form of investment, Mr Tibrewal notes, adding: "The earlier you start investing, the bigger the corpus of your savings will be."

Mr Tibrewal, who is also treasurer for the Rotary Club of Singapore, learnt the value of saving as a child, when he wanted his own camera and was told by his father that he could buy one when he started earning his own money.

It spurred him to put aside some of his pocket money in a fixed deposit account, eventually saving enough in 18 months to buy the camera.

"This was my dad's way of teaching me the tenets of saving."

* Worst and best bets

* Q: What has been your biggest investing mistake?

A: When I started investing in equities as a teenager in 1998, I realised that I could take leverage and that would magnify my returns manifold.

However, as we all know, leverage is a double-edged sword. After making handsome profits on my first few trades, I lost a considerable chunk of money in the dot.com bust. I had to ask my family to help fund those losses.

That was when I took my worst loss from investments, about $10,000 - a considerable sum of money for me at that point in time as I was around 20 years old and living in India.

Since then, I have not traded and invest only for the long term.

Q: And your best investment?

A: Technology has always fascinated me - I was amazed when I first saw a mobile phone and considered the power of the device. A few years ago, I started to consider how outsized returns could be made by investing in companies with cutting-edge technology that can challenge the status quo.

Over the past few years, I have bought several technology stocks, some of which have quadrupled or quintupled in value.

Aside from FAANG stocks (Facebook, Apple, Amazon, Netflix and Google parent Alphabet), one of my best investments was in Twilio, a United States-based cloud communications platform.

I bought shares at around US$27 in 2017 and sold them at US$90 in 2018, which at the time seemed like a fantastic return.

In hindsight, I wish I had not sold when I did, as the shares are currently trading at around US$250, which again reiterates the power of long-term investing.

Choo Yun Ting

Q: What's in your personal portfolio?

A: The majority of my portfolio is in real estate, followed by blue-chip equities and high-grade fixed income. I also have some smaller investments in tech and healthcare start-ups.

Currently, I invest mostly in the United States and China - the world's largest economies, which generate many of the best innovations.

My average annual return is in the mid-teens; however, I deploy leverage on my real estate portfolio and much of it is unrealised as I have not yet sold the bulk of those assets.

Blue-chip equities have also provided good returns. My mantra for equities is to treat them like real estate - just because they can be bought and sold every day does not mean we should be trading them.

My strategy is to identify the sector leaders with long-term growth, buy those companies and hold on to them for at least five years.

That said, these should be monitored, in case a governance or any other issue crops up, and managed accordingly.

Furthermore, do not be tempted to sell to book profits early as some of those companies could turn out to be multibaggers.

Q: Describe your investment strategy.

A: My strategy is very simple. I ask myself: "Am I getting value for the price I am paying?" If the answer is yes, I do my research, due diligence and consider investing.

That said, arriving at the right value is not that simple. It is more of an art than a science.

Q: What are your immediate investment plans?

A: I do not have any immediate plans to make significant changes to my personal portfolio as it is designed from a long-term perspective.

I am also currently more occupied in thinking about my clients' portfolios in an environment of heightened volatility and uncertainty.

Q: How did you get interested in investing?

A: I come from a business family, so in many ways, investing is in my DNA - I grew up learning about business and investing.

I enjoyed helping my father with his business, which traded cotton and textiles, during my school holidays. I learnt to tackle real-world issues, when I was 13 to 14 years old, that expanded my education beyond textbooks.

My experience growing up also showed me the effort that goes into earning money and taught me not to take my privilege for granted.

Looking back, I think this is what led me to study accounting and finance.

Q: What else is in your financial plan?

A: Other than providing a good education, I do not intend to put money aside for my children.

I firmly believe in giving back to society and a good portion of my legacy will be earmarked for helping the underprivileged.

A United Nations study showed that more than 60 million children do not have access to primary education and another 200 million never reach secondary school.

Education is the best way to alleviate families from the vicious circle of poverty and, therefore, I am very passionate about children's education.

Q: How are you planning for retirement?

A: My portfolio is currently slanted towards capital appreciation.

As I move towards retirement age, I will tweak it to generate regular income, which some of my real estate investments are already doing for me.

During retirement, I would like to immerse myself in volunteering work, as I find getting hands-on is more gratifying for me than just writing someone a cheque.

Q: What does money mean to you?

A: It may be a cliche, but I do believe that money is a means to an end and not the end itself.

I also believe that if I am more fortunate than many others, and if I am able to improve the lives of others with the money I have, I am morally obliged to do my part.

If I can bring a smile to the faces of even a few people with the resources at my disposal, I would be very happy.

Q: Home is now...

A: A three-bedroom apartment in Tanjong Rhu.

Q: I drive...

A: A black BMW 520i.

Mr Manish Tibrewal is the chief executive of Maitri Asset Management. Maitri was founded as the Tolaram Group's family office in 2015 before evolving into a licensed asset manager last year.

Recent action by central banks to cap or stop banks giving dividends in order to “preserve their capital buffers” is a classic example of excessive nannying by central bankers and financial regulators that weaken the ability of free markets to respond to risks.

Retail and institutional investors like bank shares because they are leveraged diversification plays on the real economy. Bank stocks are blue chips that pay steady dividends. When troubled times come, good banks survive and will do better on recovery. But if you restrict their dividend income payout, then retail investors cut off from steady income from bank deposits are forced to go into the stock market and punt tech stocks that have price earnings ratio of over 40, some with no revenue or dividends and with business models that few understand. The minute dividends are cut, the share price drops!

In other words, if you remove the safe haven role of bank blue chips, prudent investors are fed to a world where they become speculators in a bubbly market, created by excessive low interest rates. Let bank boards decide what their dividend policy should be. Let investors judge whether they trust that management to control their credit risks.

If the bank doesn’t want to pay cash, let them pay out in stock, and go to market for rights issues if they feel that their capital is insufficient. But by capping dividends, the financial regulators are signalling that they know better what the risks are than the market. That is not a vote of confidence in the banks or the quality of their bank supervision.

Central bankers have become nannies who preach free markets, but don’t trust the market. By rescuing the market so often and growing so large, they are becoming the market, but still say that the market must bear the ultimate risks. In effect, they bail out the smart money and pass the losses to gullible ones who believe that the central bankers understand what they are doing.

No wonder the financial world is in deep trouble.

Sue-Ann Tan

2 August 2020
The Straits Times
STIMES
English
© 2020 Singapore Press Holdings Limited

Fintech founder believes in investing with long-term view, tapping power of compounding

Building solid financial foundations through investing for the long term is something that has stood Mr Laurent Bertrand in good stead over the years.

He also hopes to help others reduce financial anxiety through developing their own financial-planning road maps.

Mr Bertrand, 47, is the founder and chief executive of fintech firm BetterTradeOff, which helps people build financial plans online.

The business started here in 2015 and has since raised more than $10 million in three funding rounds.

He said: "We started BetterTradeOff with the belief that we could leverage technology to provide people with a means of making better decisions regarding their financial future, in a way that was easy enough for everyone to do it."

The business started as a B2B solution for financial advisers, and an end-consumer version called Up was launched last November.

Up has nearly 10,000 users now.

For Mr Bertrand, creating a sound financial plan is also something close to his heart, having weathered the financial crisis in 2008 with a newborn baby then.

"Keeping a long-term perspective and commitment helped, but it wasn't easy to make difficult decisions. Should I reduce my life insurance to reduce cost? What would happen to my family then?

"That experience convinced me that I should try to help people make better financial decisions."

Mr Bertrand, a Frenchman and Singapore permanent resident, is married to a Korean artist.

* Worst and best bets

* Q: What has been your biggest investing mistake?

A: While I was working in private banking, I made a currency trade using a 10-year currency option (USD/JPY). It was a high conviction trade and the idea was that I would have time for it to play out. I executed it with two different strike prices and got quite lucky within a year.

Unfortunately, I was also very busy and didn't dedicate the time to monitor the position or define in advance my exit for the trade. I ended up closing the position cutting my losses to 50 per cent when I could have more than doubled my money. It was a painful reminder that we can all benefit from professional advice and services.

* Q: And your best investment?

A: Apart from BetterTradeOff, my best investment is my MBA at Insead. At that time (in 2003), the fees were €42,000 but if you count the opportunity cost, it was more than €100,000 in total. This was quite an effort then and it took some time to reimburse my student loan.

What mattered is that I took a long-term view on it and this commitment has paid off multiple times, beyond the financials as well. I was able to transition to banking after spending a few years in strategy consulting.

The greatest value, though, is the Insead community, which has been a constant source of inspiration and support, opening doors to unique opportunities and resulting in a number of very good friends across the world.

Today, I have Insead alumni as investors, colleagues and board members of BetterTradeOff.

I made it a point to support my alma mater financially, but also regularly spend time interviewing candidates, a unique tradition at the school.

Finally, I met my wife while studying at Insead and we decided to call Singapore our home.

They have two children, aged 12 and 16.

He has a master's degree in business administration from Insead and another master's in physics.

He started his career as the head of information technology with cosmetics firm L'Oreal, before working with a consulting firm and banks.

Q: What's the next stage of growth for your businesses?

A: Following several successful pilots with major global institutions, we're now working on long-term licensing deals and partnerships that will allow us to bring our solution to new countries and a vast number of new customers.

We have also signed several leading financial advisory firms to our adviser platform, and added a well-respected former adviser to our executive team to continue to expand this important pillar of our business.

Finally, we have Up, a platform which continues to grow in Singapore. We continue to improve and expand this solution in Singapore, while developing it for launch in new markets later this year.

The objective is to demonstrate our ability to scale all aspects of our business, while generating recurring revenue quickly before entering the United States, the largest and most competitive market for financial services.

With Covid-19 negatively impacting so many people, especially the poorest, we also hope to make our solution available in countries like the Philippines, where we feel we can have an even greater impact on people's lives and society as a whole.

Q: What's in your portfolio?

A: Most of my wealth is tied to my company. As an angel investor, I've also invested in other tech start-ups, like MyRepublic. My portfolio is mostly in equity with stocks, funds and exchange-traded funds. Regarding property, I invest through real estate investment trusts which provide good income, diversification and liquidity. My parents invested in properties and did quite well. I just happen to have better opportunities with my own company at this stage.

Q: How did you get interested in investing?

A: With the change of the retirement mechanism in Sweden, where I was at the time, suddenly I had to choose where to invest 2 per cent of my salary. I decided to invest in Internet and mobile technology. And if I'm not mistaken, the date for the first investment was at the peak of the tech bubble. I was travelling a lot and the headlines were all talking about the bubble bursting. Somehow, I made the link between the news and my investment only when I received an orange envelope with the statements inside. I had lost 60 per cent of my retirement savings in a few months. Following this shock, I decided to study investing more seriously and began reading any book I could find on the subject.

Q: Describe your investing strategy.

A: I focus on investing with a long-term view on businesses that solve important problems at scale and thus have a positive macro impact. Ultimately, you invest in the people that make it happen. Thanks to my career and interest in tech, I have been fortunate to meet and collaborate with many extraordinary people. Some of them invested with me, some of them joined us.

More traditionally, I also invest every month in equity index funds for my retirement to benefit from dollar-cost averaging and, most importantly, from compounding. Many people don't understand how investing over the long term can make a difference. I try not to think too much about it or time the market. I do invest in single stocks from time to time when I have strong conviction. In such cases, I make sure the amount is big enough to make a difference, but small enough that I can afford to be wrong.

It also helps to be able to visualise how time can help you build wealth even if you start late.

Buying a property is also on the horizon - not having to make rental payments is especially important when you don't have income from salary at retirement.

Q: What else is in your financial plan?

A: I come from a family where, short of unforeseeable accidents, we die of old age and generally in good health. However, witnessing the impact of my grandmother's dementia on my mother who was caring for her, we have made sure that we have suitable legacy planning in place, including a will and Lasting Power of Attorney.

I use our solution, Up, to keep track of all our accounts, assets and insurance policies.

It's also easier now that there is an account aggregation service to keep the plan updated.

Q: How are you planning for retirement?

A: I use Up to estimate how much money I will need when retiring. Like 80 per cent of Singaporeans, I'd like to maintain the same lifestyle I have now. But the truth is, our spending patterns - like healthcare costs and family composition - change with age. If you factor in inflation by the various expense categories, figuring out how much is needed can be quite complex. I underestimated my expenses by 40 per cent.

Like many, my aspiration is financial independence.

Q: Money-wise, what were your growing-up years like?

A: My parents were entrepreneurs and, from a young age, I witnessed them working very long hours. I remember my grandparents taking care of me and my sister for three years to help them.

My father was a gifted jeweller, but it was my mother who was the driving force behind the business. She has an innate sense of business and innovation. At the time when shop owners were travelling to Paris to visit jewellery designers and producers, she organised trade representative tours. She also developed a private customer base of high-net-worth individuals. I was very fortunate to have such role models.

Q: Home is now...

A: We rent a condominium apartment near the Botanic Gardens. While relatively old by Singapore standards, we love the place, the surroundings and our friendly neighbours. It's a big place with lots of natural light - which are both important for my wife, who is a painter.

Q: I drive...

A: My first car was my father's car, a Volvo 240 with over 600,000km! I still drive a Volvo, this time a red XC60 with much less mileage on the odometer.

Mr Laurent Bertrand, 47, chief executive and founder of BetterTradeOff, which helps people build financial plans online, uses his business' platform Up to keep track of his family's accounts, assets and insurance policies. He also uses it to estimate how much money he will need when retiring.

Singapore Press Holdings Limited

When will be the ex dividend?

Choo Yun Ting

9 August 2020
The Straits Times
STIMES
English
© 2020 Singapore Press Holdings Limited

Venture capitalist counts acquiring Gong Cha franchise in S. Korea as one of his best moves

Instead of trying to time the market, venture capitalist Martin Berry prefers to acquire a small position in assets that he likes and track it before deciding whether to increase his exposure.

One of the gems the Australian counts as his best investment was acquiring the franchise for Taiwan bubble tea chain Gong Cha in South Korea.

"While I knew nothing about bubble tea, I could see it was a very economically attractive business that could scale," says Mr Berry, 43.

In just under three years, the chain had 400 stores, prompting Mr Berry to make his next move - a partnership in 2017 with a private equity firm to buy out Gong Cha's global operations.

He and his partners then sold the company to United States private equity firm TA Associates last year to reap a near five-fold increase on his initial investment.

His next step was to set up venture firm Dtribe Capital to invest in early-stage companies, with a focus on digital transformation solutions and digital health technology.

Mr Berry, who is married with a son, adds that one of his biggest insights in recent months has been just how unprepared many businesses were for a situation like the coronavirus pandemic.

He says the level of unpreparedness shows how most firms, regardless of size or industry, underinvested in digital transformation despite the importance of it being talked about for years.

"The opportunity for these businesses is to use this as a major catalyst to get the job done, digitalise their processes and make their organisation more efficient and easier for customers to find them and do business with them, made even stronger by the government's efforts to help support this transformation," Mr Berry notes.

His venture firm uses several key metrics to assess start-ups: the total addressable market, the founder's characteristics and passion, validation of the product in the market, and whether the product is in attractive segments with high degrees of profitability.

His advice to young entrepreneurs? "Before you jump deep into something, you really need to go through a robust process of seeking independent validation as to the quality of the business you want to start."

* Worst and best bets

* Q: What has been your biggest investing mistake?

A: I started playing in the stock market just before the tech bubble burst in the late 1990s, and I got greedy over a sizeable speculative single stock position that went from being up 400 per cent to essentially $0. It was approximately 30 per cent of my savings at that time, so it hurt.

Key lessons learnt were not to be greedy and have a basis for why you invest and buy or sell a stock that is fact-based, driven on fundamentals and not emotionally driven.

Likewise, never put all your eggs in one basket. The company was an Australian tech firm called Voicenet and it was being driven up purely on speculation in share forums.

A fact-based investment is one that is anchored in both quantitative data - that is, financials, customers, market size and traction - and also in qualitative assessments such as competitive position, management team and value proposition.

Q: And your best investment?

A: Gong Cha will always be an investment that is extremely hard to replicate, although we are trying to do so.

In 2011, I came across Gong Cha in VivoCity and was fascinated by the number of people queueing up in what was a small-format store with low capital expenditure, for a drink that is largely water, tapioca and tea leaves, which offered good margins.

I studied the business for about three months before deciding to fly to Taiwan to pitch for the master franchise for the Korean market and, in turn, give up a lucrative career in banking.

In terms of personal investment, my best bet is probably Tesla. Leveraging my experience gained from investing in early-stage tech companies, I could sense that what they were doing was game-changing and with a founder like Elon Musk, it ticked all the boxes in terms of being a potential game changer.

I bought the stock at around US$200 (S$274) in 2017 and have happily seen it hit US$1,000. The most pleasing aspect of it is not the return, but seeing a highly talented entrepreneur prove so many people wrong.

He has seen many people who are in love with the idea of being an entrepreneur or with the concept they have developed, while those close to them encourage them regardless of the quality of the idea.

"As a result, I see a lot of people trying to do things that, from an outsider's perspective, will not cut it and it becomes a major opportunity cost for those people and potential financial burden," he adds.

"So if you want to be an entrepreneur, take your time, study it well and seek validation."

Q: What's in your personal portfolio?

A: I own a bit of everything across both public and private markets. It is my way of keeping an eye on what is working, what is not, and adjusting accordingly. Diversification is a lesson that continues to withstand the test of time.

On the fixed-income side, I have a large allocation to global wealth manager Pimco and, on the equities end, I have positions in Franklin Technology Fund and disruptive innovation exchange-traded fund (ETF) ARKK.

Most of my investments are made out of Singapore but are global. Singapore is a highly attractive place to invest from, with one of the major benefits being the wide availability of products you can invest in, creating significant opportunities to access various asset classes and product types.

It is important to have diversification across asset classes, product types, issuers and geographical locations.

The long term on my public-listed portfolio is slightly above market, thanks to a strong skew towards technology companies with an average annual return of about 10 per cent per annum.

The real engine is on the private portfolio side where, for example, we have made over 50 venture investments with an average return of close to two to three times invested capital so far.

Q: Describe your investing strategy.

A: Diversification is key and not in a traditional sense of bonds versus equities, but much broader than that, including an allocation to private markets. Plant small seeds, test and learn and adapt accordingly.

Examples include ensuring your equity portfolio has an exposure to the old and new economy and to even turbo-charge it with a small allocation to the theme of disruptive innovation.

Check out the ETF in the US with the ticker ARKK, which has delivered average annual returns of 17 per cent per annum since inception.

While the risk/return characteristics of private markets are different, they are often non-correlated to public markets and can offer exposure to a whole new asset class of early-stage and emerging companies that have the potential to be game changers over the long term.

Q: What are your immediate investment plans?

A: In a business context, to continue to identify and partner with smart founders in the region doing great things that improve consumers' lives.

From a personal portfolio perspective, I will probably trim some equity positions back to cash given they have had an incredible run lately, while many of the data points I see in the physical world don't look overly positive.

Q: How did you get interested in investing?

A: Making money never gets old and it is not about the materialistic sense, but as a litmus test for all you are as an investor - learning what you are good at and what you are not.

I theoretically started investing at the age of 12 when I asked my father if he could lend me $100 and help me buy a few stocks. He did not do so, but I randomly chose a few stocks from the newspaper, tried to understand what they were and did, and tracked them until I got bored of it about six months later.

During that period, they were performing reasonably well, but most importantly I had some key takeaways about volatility and the need to diversify.

Q: How are you planning for retirement?

A: I have no plans to retire; I love building businesses and to me it's not considered work.

I think we all need something in our lives that helps us get intellectual stimulation and keep a degree of discipline by having something to focus on and people to look after. For me that's business, it's what I love doing and what keeps me excited and challenged. I can't see myself retiring and playing golf every day.

Q: What does money mean to you?

A: A by-product or outcome of your ability to work hard, take calculated risk and to a degree have a little luck.

Q: Home is now ...

A: A three-storey landed property in Sentosa.

Q: I drive ...

A: My daily car is a white Range Rover Vogue.

Dtribe Capital founding partner and chief executive Martin Berry, 43, advises would-be entrepreneurs to take their time, study their business idea well and seek validation from others. He sees a lot of people trying to do things that, from an outsider's perspective, will not cut it and it becomes a major opportunity cost for them.

Singapore Press Holdings Limited

Companies & Markets
DBS Vickers fends off competition with scale and ambition
Claudia Tan
Claudia Tan , DBS Vickers fends off competition with scale and ambition

13 August 2020
Business Times Singapore
STBT
English
© 2020 Singapore Press Holdings Limited
Singapore

AS competition in the brokerage space heats up, with new online players entering the market and commissions falling, DBS Vickers (DBSV) is counting on its position as part of a larger banking group to give it an edge.

Lionel Lim, chief executive officer of DBS Bank's brokerage arm, told The Business Times that a collaborative approach has allowed it to tap resources from parts of the bank to provide customers with more offerings.

Working closely with DBS's capital markets branch, for instance, allowed the brokerage to provide institutional clients with unrivalled access to some of the largest IPOs and secondary placements, along with timely market information.

In return, DBSV acts as an extensive investor distribution network for the securities that are brought to market by DBS.

"This collaboration has undoubtedly helped us compete on the global stage and drive value for our clients," said Mr Lim.

Meanwhile, even as the novel coronavirus pandemic has curtailed business travel and inconvenienced dealmaking, DBSV said it has been able to carry out deal distribution remotely due to greater coordination with various functions of the bank including capital markets, treasury and markets, institutional banking and private banking.

The brokerage registered a 25 per cent increase in investor roadshows year to date as compared with the same period last year.

DBSV has had a good first half. Its income almost doubled year on year as trading volumes increased in a more volatile market environment, it said in a press statement on Wednesday.

The monthly average of new accounts opened on DBSV's digital trading platform more than tripled in H1 2020 compared to the same period last year.

DBSV is hoping to build on this momentum with its fully integrated digital platform. Clients can access trading, investment advisory and wealth management solutions, which he said can help "create greater customer stickiness".

Providing value-added services from other parts of the bank is a way for DBSV to explore cross-selling opportunities and grow its franchise, said Mr Lim.

DBSV also said it is looking towards other opportunities in Asia capital markets, and will be focusing on rolling out new digital products to tap rising interest in passive trading and expanding its online access to more markets globally.

Singapore Press Holdings Limited