Learning from the Chief Investment Officer

In last week’s The Sunday Times, there is an article titled “Me & My Money: Investing for long term to build retirement nest egg“. Me & My Money hasn’t had a good article for very long. This time it featured the Chief Investment Officer from AIA talking about her personal investment strategies. Her honest sharing and down-to-earth advice have struck a chord with me. I am especially impressed by her no-frills investment strategies. Below are five lessons I learned her interview.

Lesson #1: Don’t blow your own horn

Most of the so-called investors appeared in Me & My Money sang their own praises throughout the article. Since this is a property blog, let;s take the past interviews with property agents as an example. The agents boasted what big money they made from investing in properties. Any time is a good time to buy because property investment can surely make money.

It is not surprising to see salespeople assuring potential customers that all their geese are swans. Afterall, this is what they do for a living. The same reason why we shouldn’t ask a fishmonger whether his fish is fresh or not. It is justified for them to say so. But it is not very convincing to the readers.

On the contrary, this AIA executive said she tends to “hold funds and exchange-traded funds to avoid any conflict of interest” with her job nature. Wait, did I really see the words “avoid conflict of interest”? For the longest time I haven’t seen any investment or property article in the local media trying to “avoid conflict of interest”.

She is not your insurance agent who tells you life can be unpredictable and you must be well-covered. Instead, she said “you can never predict any black swan or grey swan events these days”; and “staying diversified serves to help you avoid suffering major losses from market pitfalls”.

She didn’t touch on anything about insurance in the whole interview. Because of this, as somebody who does not believe in insurance, I ended up reading the full article.

Lesson #2: The importance of being “modest”

If you are a long-time reader of my blog, you probably remember I was featured in Me & My Money in 2014. Back then I had an obligation to help the publisher promote my book No B.S. Guide to Property Investment, and ride on it to promote the newly-formed Property Club Singapore.

Unless you have no choice but to promote your own start-up business, you are advised to avoid getting your publicity there. Talking about your money is probably the most dangerous subject. Our Asian culture teaches us to be humble. When you brag about your money, you sound arrogant. Those who have less than you will be jealous of you. Those who have more than you will laugh at you. Except the Inland Revenue Authority of Singapore, nobody appreciates your honest sharing of income and wealth.

The same is true when you mention the properties you bought. As I said in my blog post “How to tell savvy investors from average ones?“, all savvy property investors can easily tell whether you are one of them by asking four simple questions:

1) What have you bought?
2) When did you buy them?
3) How much did you buy them for?
4) How much did you sell them for?

Even if you have ten properties under your name, only the average Joe who know nothing much about properties will marvel at your possessions. Experienced property investors can immediately see through you if you bought the wrong things.

So how did the AIA executive fulfill the job of promoting her company while keeping her personal wealth private?

I usually stay at around 60 percent fixed income and 40 percent equities. I am happy if the returns achieve 5 percent to 10 percent every year with a target return of 5 percent.

To me, the key to wealth accumulation is through the power of compounding. If you can get 5 percent return year on year, you will grow your portfolio by 55 per cent in 10 years. That is a much better performance than 10 per cent up one year and 5 per cent down another year.

Maintaining a sustainable positive performance is crucial to growing one’s wealth in the long run. This balance of bonds and equities is what I consider a “balanced” risk profile.

Lesson #3: Not another big hat no cattle

Does her portfolio sound conservative to you compared with how other interviewees talked big about their investment?

If an investor keeps 60 percent in fixed income and can still achieve minimum 5 percent net return every year regardless of the ups and downs in the market, he or she is doing very well in personal investment. Anyone who has invested in the money markets for some years and understand about compound investment will agree.

I am also very conservative in investment and dislike anything that requires me to take my chance. Whenever I invest in anything rashly, I lose money without fail. For instance, there is a principle to view 100 properties before buying the first one. I went for 75 viewings and bought my first property. And I made a mistake!

An ex-colleague who won lottery jackpots several times once asked me to chip in for a lottery ticket. I told him I would not win anything. Both my Bazi and Zi Wei Dou Shu charts said I could only make money from hard work. There was no quick or easy money in my life. Should I contribute money to buy a group ticket, no one could win anything.

Too many people are overly excited by the paper profit they make in a bull market but lose their shirt in a crisis. Too many people are carried away by what is hot in the market, only to have their life savings wiped out when it’s time to wake up.

On that fatal day of February 2, 2018, cryptocurrency suffered a massive sell-off and USD115 billion worth of digital coins were lost in a single day. Bitcoin used to be the darling of investors in 2017 but plunged from a peak price of just below USD20,000 to USD7,700 on that day.

Because of our human weakness of greed, we never learn our lesson.

In March, Federal Reserve injected USD700 billion under QE Infinity for unlimited purchase of bonds. The next month in April, like all the major capital markets in the world, Singapore’s total foreign currency non-bank deposits immediately climbed 20 percent. Fed’s move was no different from pouring banknotes into the open sea. Many were excited by the revived equity markets and jumped inside the sea for the easy money.

Last week, Hong Kong was so over-flooded with hot money that the Hong Kong Monetary Authority was forced to buy billions of US dollars to avoid Hong Kong dollar from strengthening beyond the US dollar peg rate. The Hong Kong Stock Exchange has never been so bullish before. Besides the listing of JD.com, the world’s second largest IPO, listed Chinese firms that no longer feel welcome in US equity markets have no choice but to find listing in Hong Kong. As they say, no need to move a finger and money finds its way to your pocket.

Think now is the best time to make some quick money? Fed did pour loads of cash into the sea. But after investors grab the banknotes in the waters, they turn around and suddenly find everyone scramble back to the shore. Where are the life-saving floats in the next financial stampede?

Lesson #4: Spend every weekend on retirement planning

For the insurance executive, financial planning and retirement planning is a weekend activity for her and her husband.

We started planning by envisioning the kind of lifestyle we wanted to lead after retirement. Then we began analysing our spending habits to develop an estimation of expenses by major categories.

Once we arrived at a yearly budget, we then decided how many years of retirement we want to save for. This helps us decide when we can retire and what are the potential investment returns we need to achieve.

I am also a big supporter of retirement planning. Financial advisors may tell you to start doing so in your 40s. But I believe in planning for your retirement as early as possible, preferably the first day you go out to work.

Most people do the same or similar jobs all their working life just for a living, or because they cannot think of other things to do in their life. They spend their time doing nothing new and doing nothing better, only repeating the same routine day after day for decades – until the day they are unable to work or are kicked out of the system.

Always begin with the end in mind. Visualize what and when you want to achieve in your job. Treat every assignment as the last one you will be handling.

Carpe diem. Seize the day, boys. Make your lives extraordinary.

– Dead Poets Society

Lesson #5: We don’t need much

We don’t need a lot of money but without money, life could become problematic.

This is a simple statement but it is very true. If you have been in poverty or in financial troubles before, you will fully understand the meaning behind it.

What happen when it comes to personal questions “Home is now” and “I drive …”?

While many being featured in Me & My Money couldn’t wait to share the fact that they are staying in bungalows in prime districts and driving BMWs or Mercedes, her answer is a two-bedroom condominium in a very convenient neighborhood surrounded by restaurants, supermarkets, coffee shops and a lot of greenery. There is no mention of project or location. But the answer tells you that convenience and greenery are what the couple is looking for in a home, not luxury or prestige.

She mentioned that Singapore can get around by public transport or taxi, though she has thought of riding a motorcycle like she used to do in Taiwan.

Born in Taiwan and worked in New York, Hong Kong and Singapore before, this executive has a global view. While the locals think it is their fate, foreigners think they have an option. The latter knows what you shouldn’t buy in a country. They won’t buy a car in Singapore. They won’t buy but rent in Hong Kong. This is the same logic for not looking for seafood in the mainland or red meat in the coastal areas or offshore islands. Because the choices are few. Because the prices are ridiculous. Because they are not worth it.

In a nutshell

I am amazed for the fact that this insurance executive has given practical financial advice to the audience, yet managed to keep her personal financial details private.

We have no idea about her or the couple’s net worth. We don’t even know whether they buy or rent their place. There is no mention of a single name of any company, equity, bond, fund or property project.

No free advertising. No sales talk. No hard selling. No BS. These are exactly what The Sunday Times Invest editor should remind all the interviewees when they talk about them and their money in the Invest section.

P.S. For the health of our club members, Property Club Singapore will not be organizing any seminar or workshop during the Covid-19 period. Members are now free to watch seminar videos of Year of the Pig Property Strategies and Singapore Property Market. Just log in and access them under the “Members Only” tab.

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