Coffee With FFN and Pauline

Pauline

Pauline graduated from the Nanyang Technological University with a Master of Arts (Instructional Design and Methodology). She is a certified facilitator for “The 7 Habits of Highly Effective People – Introductory for the Associates” and a certified Image Consultant by the First Impressions UK. She is currently the Director (Education & Training) with 8 Investment Pte Ltd, focusing on the design and development of Value Investing programs. In 2012, Pauline published her 1st value investing book titled “Value Investing for Women”.

FFN: At what age did you get started in investing? 

Pauline: I started investing properly when I was 32 years old. Before that, I was merely speculating.

FFN: How did you get interested in investing and who inspired you to get started?

Pauline: I started buying unit trust through my financial planner since 2000.  The result from my unit trust from 2000 to 2009 was -40%.  I was very upset with this result and thought enough is enough.  I felt I should take responsibility. Thus, I went to source around to see how I could improve my results as I had lost nearly half of my hard-earned savings over past 10 years.

In Jan 2010, I heard Ken Chee, Founder of 8 Investment, talk about Value Investing.  I was bought into the idea after the one hour speech by him. After hearing Ken’s speech, I signed up for his Millionaire Investor Program (MIP) in Mar 2010.

Value Investing changed my whole idea of what investing is all about.  Not only that, Ken corrected my thinking about investing in equities.  I had been brought up with the idea that those people who trade in stocks are gamblers because that was how people around me behaved. They all speculated in stocks and saw relatives losing their fortune in the stock market.

After the program, I worked hard to speed up my learning curve as I was very eager to make back my 40% losses.  The more I studied about Value Investing, the more confidence I gained and more interesting it became.

FFN: What was your life like before investing and how is it now?

Pauline: My life before investing was like any other typical Singaporeans. Since young, I worked hard in school to gain myself an entry to the local university.  With a degree, I found a decent job in the public sector, got married and my life has been work and family. And since I did not have any investing knowledge, I decided to outsource this job to my financial advisor, only to realize that it was more expensive to outsource than to get myself educated.

FFN: How do you choose which stocks to invest in? What are some of your strategies?

Pauline: I practice a 3R concept: Right Business Model, Right Management and Right Valuation Price i.e. the business has an excellent business model, run by management with integrity, and the market price offers me 50% discount from the valuation price.

I have a systematic strategy for investment.  Investment strategy is not just about investment but also money management strategy.  This is the strategy I use:

  1. Allocate my income into different jars

Financial Freedom (Pay Myself First) – 30%

Education – 5%

Play – 5%

Charity – 10%

The last 50% will be used for your daily expenses such as transport, insurance, food and children’s expenses.

Expenses – 50%

  1. Cover myself with hospitality and accidental insurance
  2. Accumulate 6 months’ worth of living expenses
  3. State the criteria I want for my investment:

The company that I invest must have a 15% growth in business and minimum 5% dividend yield.

  1. Create a list of companies that meet the 3R and your criteria
  2. Create my baskets for investment

Basket 1: 30% of the Financial Freedom Account

For any companies which are undervalued regardless of market situation.

Basket 2: 30% of the Financial Freedom Account

Invest when there is a mini crisis. During this period, some of the companies that might be overvalued when the market was bullish have thus became undervalued. So this would be a good time to invest in these companies. This is also the time to allocate more funds or reinvest the dividends from those companies that you have invested in with the first 30% because the buying price is more attractive now.

Basket 3: 40% of the Financial Freedom Account

Invest when a major crisis happen, e.g., subprime. You never know when it will happen, maybe 2 years later, 5 years later or even 10 years later.

Every month, the 3 baskets will be topped up. For example, if I save $1,000 every month for financial freedom account, I will allocate $300 to basket 1, $300 to basket 2 and $400 to basket 3. The above method which I practice ensures that there will always be funds available for investment even during the crisis periods.

  1. Monitor by reading quarterly and annual reports, and attend AGM
  2. Sell when my investment criteria no longer hold for that stock

FFN: What are some of the stocks in your portfolio currently?

Pauline: As of Mar 2013, they are CapitaComm Trust, Boustead and BreadTalk.

FFN: Where and how do you look for companies to invest in?

Pauline: I look within my circle of competence, i.e. the business that I understand. Also, after joining MIP, there is a network of investors where we will share with one another when we unearth undervalued companies.  The network helps. I unearthed Transpac Industrial via the MIP network. I sold this stock off already as it was way overvalued in early 2013.

FFN: What are the mistakes you have done pertaining to investing and what are the lessons learnt?

Pauline: Two major mistakes I made were:

The first major mistake was the unit trusts I bought over 10 years. The lesson I learnt was that it is important to have financial education.

The second mistake I made was in a shipping company that I invested. It was a cyclical company and I did not know the company well, bought it when the cycle was quite high.  I sold it off at a 50% loss in 2 years.  Fortunately, the rest of the 6 stocks I invested have a good percentage return. Overall, my portfolio is still very healthy. The lesson I learnt was that I needed to understand more about cyclical business and that diversification into different types of businesses is essential. Just to highlight that diversification is not about spreading all your money into 20 to 30 stocks. And this mistake was different from the first mistake.  For the first mistake, I do not know how to cut loss and was at a lost what to do.  But this time, I know what went wrong and was able to make a decision.

FFN: What psychology do people need to succeed in investing?

Pauline: I heard this from my other investment mentor, Clive Tan, co-founder of 8 Investment: “You are right not because others say so. You are right because the facts and reasoning are right.”  I remember my aunt, who has been trading in stock market for 20+ years, warning me not to touch the stock market during Euro Debt Crisis.  While, clearly I did not seek her advice because I was clear what I was doing and fear did not set in even though I bought during crisis.

FFN: How has the investor in you evolved over the years?

Pauline: The transformation for me is great.  From a novice investor in 2009,  who knew nothing about the equity market to making value investing a hobby in 2010 to making it a full-time career, inspiring others to take charge of their financial health. And from 2011 onwards, I have touched lives through talks and a book that I’ve written, “Value Investing for Women”.

FFN: What advice would you give for beginners who want to start investing?

Pauline: Seek the right financial education or get a credible mentor to mentor you before investing.  The major loss in investment is not only the monetary loss but the time loss to compound the money.  You can make back your money but you cannot buy time back.  It is very painful to realize that I made a mistake only after 10 years.

Also, I would like to correct this thinking for beginners because I used to have this thought.  Many people thought they are investors by putting money into an instrument for long-term and praying hard that the price will go up in future.  That is speculating, not investing.

FFN: How was your experience writing a book, especially for women?

Pauline: Doing research was fun. It was then stressful to write. It was also tedious to check through my work. However, it was very rewarding when I saw women coming to my talk because they were inspired by my story.

FFN: It can be said that women are generally not interested in investing. They rather leave it to the men (their husbands or partners). What is your take on this?

Pauline: I agree with you.  Many women generally are not interested in investing.  That’s the reason why I decided to write a book “Value Investing for Women” to encourage more women to take charge of their financial health.

FFN: However, it has been said that women generally are better investors than men as women do not over trade and are not overconfident of their skills. As a person of the fairer sex, what are your thoughts?

Pauline: Yes, I think so too. I think I’m a good example.

FFN: Which female personality do you look up to and why?

Pauline: My mum.  She’s someone who will do the best for her family, including sacrificing her life.

FFN: What do you think is the biggest misconception people have about money?

Pauline: Just save and put the money in fixed deposit because the interest and principle are guaranteed. They do not know that with inflation now at about 5%, the loss is also guaranteed!

FFN: What is the one thing, in your opinion, do people need to succeed in investing?

Pauline: Be humble to learn from a credible mentor.

FFN: How did your personal financial planning change after a big change in your life eg. marriage, having kids, buying a house, buying a car?

Pauline: I do not own a car, live in a HDB where CPF pay for it. So my financial planning only needs to make sure that I am not a financial burden to my kids in future.  I make sure I can live purely on passive income when my physical body does not allow me to work for an active income.

FFN: What are the habits one must follow to have a sound financial life?  

Pauline: Firstly, pay yourself first. Secondly, live within your means. Thirdly, learn the proper way of investment. Lastly, take action to compound money at least at a rate higher than inflation.

FFN: A parting shot for the readers?

Pauline: Seek continuous education, join credible network and take action!

Coffee With FFN and Victor Chng

Victor

Victor Chng is an investment analyst at 8 Investment Pte Ltd. He specialises in unearthing high-growth, small-capitalisation companies. Currently, he co-manages a private equity fund of over $7 million. Victor also represented Singapore in the 2008 TAFISA World Games in Busan, South Korea and was the 2008 IFMA World Muay Thai Championships bronze medallist, kicking some serious ass along the way.

FFN: At what age did you get started in investing? 

Victor Chng (VC):I found out about value investing when I was 20 but I only started investing when I was 23.

FFN: What/Who inspired you to get started?

VC: During my polytechnic days, my family got into financial issues. This really woke me up and I started to think what I could do to be financially free. So I started to read books on why certain people are successful and rich in life. I found three common things: They own businesses, invest in properties and equity. I started to ponder which one was most suitable for me.

I had no idea how to start a business and I didn’t have enough capital for property investment. This left me with the last choice – equity. At that time, stocks equaled trading to me, so I started to read books on technical analysis but I couldn’t understand how it worked. It was rather confusing so I gave up in the end.

It was only in 2006 when one of my friends told me more about the world’s richest investor, Warren Buffett. I went to research more Warren Buffet’s investing methodology. I discovered it was value investing and it made so much sense to me. Later I sought mentors to guide me further on value investing and I came across the Millionaire Investor Program by Ken Chee and Clive Tan.

FFN: What was your life like before investing and how is it now?

VC: My life before investing was rather aimless and I did not know what to do with my life. After discovering value investing, it really changed my life. Now I’m working in a private fund where I spend most of my time analysing stocks and reading numerous investing books. I feel blessed to have found my passion early in life. I get to meet CEOs and board members of listed companies, locally or overseas, and sometimes even visit their plants to understand more about their business.

FFN: What are some of your strategies when it comes to investing in stocks?

VC: My investment strategy is focus 50% of my portfolio on fundamentally strong businesses with low debt. 30% on distressed industries and turnaround companies and the remaining 20% is held in cash at all times in case opportunity arises.

FFN: What are some of the stocks in your portfolio currently?

VC: I invested in Super Group in 2011 at $1.31 when I noticed their ingredients sales segment doubling up almost every quarter. Now, Super Group is more than $3.

FFN: Where and how do you look for companies to invest in?

VC: I have many sources: Newspapers, stock screeners and analyst briefings.

FFN: You have co-written a book entitled “Value Investing in Growth Companies”. Please share with us some of your experiences with regards to writing a book.

VC: Writing a book is not easy. Rusmin and I really took a lot of time doing research to ensure the facts are presented correctly in the book. In writing the book, it also increased my knowledge on value investing while I was doing the research and it gave me further distinctions on how companies should be analysed and looked at.

FFN: What are some of your financial goals and how are you going to achieve them?

VC: My financial goals are to make a million at age 32 with $10,000 passive income every month. I am going to achieve it through investing in the stock market and by managing a private fund.

FFN: What are the mistakes you have done pertaining to investing and what are the lessons learnt?

VC: One mistake I made was not studying an industry’s macro factors when investing in commodity products or businesses. For instance, dry bulk shipping. I bought into a dry bulk shipper too early when macro factors pointed out a down-cycle and I lost more than 50% of my investment. Later I studied deeper about the industry and found out if I had done this earlier I would have avoided this pretty expensive mistake.

FFN: What psychology do people need to succeed in investing?

VC: I think people need to have courage and faith when it comes to investing. When the stock you invest in keeps dropping in price, you must have the faith in your research and reasoning that made you invest in that company in the first place – provided your research is diligent enough!

FFN: How has the investor in you evolved over the years?

VC: Over the years my investment style has evolved from just looking at the numbers to focusing more on a company’s business model. Good numbers are the by-product of a good business model.

FFN: What advice would you give for beginners who want to start investing?

VC: There are many different value investors out there in the world. Everyone has different ways of investing but only a few are able to generate at least 15% returns on average annually for their shareholders after netting off fees. Go look for those investors, see what they have in common and model their techniques.

FFN: What do you thing is the biggest misconception people have about money?

VC: People always think that money is scarce. To me money is abundant, everyday trillions of dollars are being transacted in the markets. The money is out there, you just need to know how to earn it.

FFN: What is the one thing, in your opinion, do people need to succeed in investing?

VC: A good investment process. People should focus on the process of finding good companies and generating good returns. If your process is right you can consistently get the same results.

FFN: What are the habits one must follow to have a sound financial life?  

VC: Be frugal and humble.

FFN: A parting shot for the readers?

VC: Time is scarce, so start investing now!

Coffee With FFN and Wei Lin

WL

Wei Lin is a simple guy who is happy with the little joys in life. He focuses on deriving long term, sustainable happiness and he thinks there is no better way to live than to devote his life to the service of others. In his opinion, investing is more of an intellectual pursuit rather than a financial one. He says that if there is any reason to invest at all, it is to amass wealth that can be re-distributed to help those who are dealt the short straws in life.

FFN: At what age did you get started in investing? 

Wei Lin (WL): I got started on my 21st birthday by opening my first discretionary stock management account with Philip Securities Pte Ltd

FFN: What/Who inspired you to get started?

WL: My first book on money is “Secrets of a Millionaire Mind” by T Harv Eker. The book inspired me to look for the differences between rich and poor in terms of the way they think and act.

As I had some spare cash then and I did not have the necessary skillsets to start investing, I decided to leave it to the “professionals”

Also, I did the math using some simple financial formulae and realize that it will really pay off in the long run if I got started early.

FFN: What was your life like before investing and how is it now?

WL: Before I started investing, I basically saved with a local bank. Well, looking back, it wasn’t exactly a bad thing since it gave me a cash pile to begin my investing journey.

After I started investing, the way I viewed money went through a major change. I cherished it more because I saw the opportunity cost of a dollar spent today versus a dollar invested. Now, I feel in greater control of my life because of the way I plan my budget and my 10 year financial plan.

More importantly, I saw the true power of money. Money, like power, if used appropriately, can be used to improve the lives of countless individuals. On one of my service learning trips to the Philippines, I learnt that it costs around USD120,000 to build a community of houses which can be used to provide shelter and electricity for the homeless. In Singapore, that amount is barely enough to pay for a sports car. I never really understood how some people valued their egoistic pursuit of material gains more than the well-being of others, who might not even have access to basic necessities like food, clean drinking water and shelter. I think there are essentially two types of happiness, the instant but temporary type which we derive from the purchase of goods and services and the more lasting type which can only be derived from our involvement in activities that helps a third-party. Consumerism and materialism might be very helpful in the progress of a nation’s economy, but it does have its repercussions on our values as a society.

In terms of the way I spend, I don’t think it changed much. I think I’ve always been frugal, I don’t really buy clothes or gadgets unless I absolutely require them (or if my Mum nags at me). My previous watch which my Dad bought for me as a gift lasted me 14 years. It got quite badly scratched over the years and the strap broke a few times (I got it fixed thanks to a local watch shop). Eventually it got really worn out and I bought a new one recently at a night market in Taiwan which costs around S$20. I really hope this one lasts longer.

I do enjoy travelling the world with friends so I guess investing just gave me more freedom in terms of my travel choices. Sometimes the air fares can be really expensive so I’d wait for special promotions before booking my flight tickets.

FFN: What are some of your strategies when it comes to investing in stocks?

WL: I take a bottom up approach when looking for businesses to invest in, my philosophy ties closely with that of value investing

I believe Buffett’s quote pretty much summarizes my strategy: “Your goal as an investor should be simply to purchase, at a rational price, a part interest in an easily understood business whose earnings are virtually certain to be materially higher, five, ten, and twenty years from now”

I don’t speculate as it is mathematically unsound. I never really figured out why people are perfectly fine with gambling with small money but felt risky to do so with larger amounts. Isn’t the odds the same? If so, isn’t the expectation still negative? I don’t think trading based on hearsay is any much different from buying 4D and TOTO.

Neither do I attempt any form of forecasting or use any economic or finance models because the underlying assumptions are theoretically sound but practically useless. If these models really work, my professors would be secret millionaires who are keeping some key information to themselves.

FFN: What are some of the stocks in your portfolio currently?

WL: I own Cambridge Industrial REIT, Second Chance, Chip Eng Seng and a few others.

FFN: Where and how do you look for companies to invest in?

WL: Scuttlebutt!

There is nothing more fun than a gathering of close friends from different industries, discussing what we have been doing and how busy we’ve been. Their stories never fail to impress and interest me. Also, some friends will discuss about the latest products that they bought and I’d ask which companies were producing these products.

Another great way to look for ideas is from our shopping receipts! Let me share with you a story. About a year ago, my gas cooker broke down and I followed my Mum to the Ubi Industrial Park to shop for a new one. The supplier’s shop was located deep within the industrial park and I was shocked by the sheer amount of inventory they had. So I thought to myself, if the landlord increased their rent by a small percentage from time to time, the gas cooker supplier probably wouldn’t shift since the cost and inconvenience of shifting would be quite high. As we walked around the industrial park, I realized that most of the tenants had pretty heavy inventory, similar to that of the gas cooker supplier. I got really interested to become a landlord in the Ubi area, so I researched and found that Cambridge Industrial REIT owned many of the properties in that area. On top of that, it was selling at a huge discount to Net Asset Value (NAV) and giving me a dividend yield of more than 8% based on my buy in price. Pretty ridiculous eh?

FFN: You are someone who has planned for his finances quite well. Please take us step-by-step on how to plan our own personal finance.

WL: The clarity of our financial plan depends on how well we know what we want in life. The key issue with many of us (who are still unsure with what we want) is that we have not gone through enough in life. This is especially so in Singapore since most of us live pretty sheltered lives. I believe that the onset of crisis triggers the hibernal part of us. When we go about our daily activities, we tend to forget who we are and what our purpose of life is. Upon a significant and impactful event, we rediscover ourselves and we stop living from day-to-day (though some people have a unique ability to place themselves in higher orders of thinking despite their current state of comfort, Ghandi is a great example)

So why did I put forth these ideas? Well, as they say, for those who know not where they are going, it doesn’t matter where they go. Hence, the focus should be on discovering our purpose and direction in life.

After which that is done, financial planning is easy. You basically just draw a timeline and list down your major financial goals, attaching a dollar value to each of them. Google helps!

For an idiot proof way of planning your retirement, please refer to CPF’s retirement calculator
http://www.cpf.gov.sg/multimedia/retirement/retirement.html

FFN: Please tell us a thing or two about saving.

WL: I think in general, people in Asia are net savers, which is wonderful! The first step to investing, other than acquiring the necessary skillsets and mind set, is building up a cash pile.

However, with increasing globalisation and influence from the mass media, this wave of consumerism is hitting Asia like a tropical storm. I see many of my peers spending nearly every dollar they earn once they start work. I can understand how difficult it is to go against the crowd, especially when you see your colleagues start buying branded products and going on luxurious tours.

Consider this true story. At the age of 25, Sir John Templeton married his wife Judith Folk and they made it a goal to save 50% of their income. Being awfully frugal, Sir John Templeton managed to open his own firm and invest their hard-earned money.

FFN: So, how then should we save?

WL: I am against the typical savings plan offered by banks and insurance companies in Singapore. Firstly, the commissions paid to the agents are too high.

Secondly, I feel like there should be an optimum amount to keep in cash at any given point in time.

For example, a young couple saving up for marriage or their first house should have sufficient savings to pay for their honeymoon, downpayment for house, renovation etc. On the other hand, a married couple whose children are financially independent and debts almost fully paid for do not need as much liquidity. It all depends on which stage of life they are currently at and of course, their financial situation.

The financial planning rule of thumb is to keep around 3 to 6 months’ worth of your current monthly expenses as an emergency fund. This pool of money will be helpful to the individual should he get retrenched or decide to make a career switch etc.

Lastly, the key issue with a savings plan is that over time, we tend to save “too much”. The excess cash should be put into long-term investments, else the opportunity costs are simply too high. I think holding too much cash is risky.

I would strongly recommend that we save our cash in a Money Market Fund (MMF), for example, there’s one by Phillip Securities Pte Ltd, which can be automatically activated by using their trading account, POEMS. I use this fund. MMF provides the individual with a higher interest rate as compared to most savings accounts offered by banks. On top of that, there is no lock in period.

(FFN: Do note that Wei Lin does not receive any commission from Phillip Securities Pte Ltd for talking about MMF. He is just sharing his personal experience.)

FFN: How much of his monthly income should a person save?

WL: Now, this really depends on the comfort level of the individual and his current financial obligations. Obviously, singles are able to save more than say, a couple with young children and elderly parents to take care of.

We need to think in terms of income allocation and discipline of saving. I suggest that individuals have an automated function in their bank account which channels a portion of their income into a separate account. This will force them to set aside savings every month (for salaried employees). As for self-employed individuals or business owners, they need to plan their cash flows in advance, preferably at the start of each year.

We have to be prudent in our spending and build healthy financial habits over time. Like in the story of the grasshopper and the ant, the grasshopper might have had a lot of fun in summer but eventually, winter will come and it is the ant that has been piling up the grains, who will survive the cold.

FFN: What are some of your financial goals and how are you going to achieve them?

WL: I’ve bought my first property, saved up enough for marriage and I don’t intend to buy a car, so my next financial goal will be to achieve financial freedom.

I intend to achieve this through my investments. If my calculations are approximately correct, I should be done by age 35.

FFN: What are the mistakes you have done pertaining to investing and what are the lessons learnt?

WL: I’ve made plenty of mistakes and I don’t suppose you have enough time and energy to read through it if I made a whole list, so I’d probably share my biggest mistake

My biggest mistake is placing too much trust in “professionals”. I thought that since they were so “in touch” with the market, they got to know best. Besides, what can go wrong? They have an entire team of analysts from the top universities in the world. On top of that, they have access to the most updated information and can make instant decisions based on that.

Big, big mistake. I believe Peter Lynch has explained the conflicts of interest and other issues in the fund management industry very well in his book “One Up on Wall Street”. Just to summarize, fund managers pretty much have their hands tied due to regulations. Also, depending on their commission structure, their interests might not be aligned with that of their clients. Last but not least, fund managers might not be value oriented. As they say, it’s hard to get fired buying IBM.

FFN: What psychology do people need to succeed in investing?

WL: Ask Ser Jing :P

FFN: How has the investor in you evolved over the years?

WL: I don’t think I ever swayed from my value oriented philosophy. The key evolution is probably the choice of industries or types of businesses I’d rather deal with.

Basically, I’d much rather stick to businesses with not too many business segments or subsidiaries. The more complex a business is, the tougher and more time-consuming for the investor to follow-up with its story.

I continue to hold dear to the following principles for retail investing:

We do not need to understand or follow macroeconomic predictions, neither do we need a formal degree in business or finance (in fact, we might be better off without one)

If we wish to beat the market consistently and want to do so with relative ease, we should own a concentrated portfolio of stocks rather than a diversified one. That being said, the level of concentration should depend on the investor’s personal appetite for risk (or in layman terms, his ability to sleep soundly at night)

Start as young as possible. Just by starting earlier than others, you give yourself a lot more room for error and learning. Also, you allow more time for the powers of compounding to work in your favour.

FFN: What advice would you give for beginners who want to start investing?

WL: Read widely and think critically about what you’re reading

Then act upon your thinking, don’t just keep talking the walk. Do it.

FFN: What do you thing is the biggest misconception people have about money?

WL: Most people think having more money is the key to riches. I think better money management should be the focus.

I get very confused when people tell me things like “I’ll learn how to manage money when I have more money.” Shouldn’t we learn how to manage in the first place so we have more?

Consider an overweight man saying, “I’ll learn how to stick to a diet when I’ve slimmed down.”
Sounds pretty ridiculous right?

FFN: What is the one thing, in your opinion, do people need to succeed in investing?

WL: The ability to be contrarian.

FFN: What are the habits one must follow to have a sound financial life? 

WL: Spend less than what you earn, invest for the long-term and do not leverage (at least for stocks)

FFN: A parting shot for the readers?

WL: “You need to balance arrogance and humility…when you buy anything, it’s an arrogant act. You are saying the markets are gyrating and somebody wants to sell this to me and I know more than everybody else so I am going to stand here and buy it. I am going to pay an 1/8th more than the next guy wants to pay and buy it. That’s arrogant. And you need the humility to say ‘but I might be wrong.’ And you have to do that on everything” – Seth Klarman

Coffee With FFN and Ken Tan

just me!

Ken Tan was a Senior Regional Sales Consultant for one of the world’s leading strategic research company. He won “Most Dedicated Salesperson of the Year” awards in 2010 and 2011 consecutively. He takes charge of overseas client accounts spanning across Asia-Pacific such as Vietnam, Philippines, Korea, Japan, Malaysia, Thailand, India. Currently, he is an avid Investor with passion on stock markets of the world. He has particular interests in the sector of properties, retail, consumer staples and other FMCG industries.

FFN: How did you get interested in investing and who inspired you to get started? 

Ken: It started off with my former colleague in the education industry about five years back.  He hinted to me that the opportunity had arrived as there was widespread negativity in the worldwide markets.

When I queried further, he strongly encouraged me to take the year-end bonus and buy into shares of companies. At that time, I have almost zero knowledge about investment and thought that the stock market was a risky game of money.

I was a salaried worker and the point of purchasing something that can’t be touched and felt was not attractive to me.  Few days later, his words of wisdom struck me when I self-reflect. Something came upon me. I researched online and discovered that my perception was one-sided.  Slowly, my interest and knowledge developed when I continuously studied about the dynamics over the past two years.  I bought into property stocks as I figure the time to buy is at the trough of the cycle – the trend is shaped by foreclosures and debt overruns.

Ironically, I met my same colleague two years back and he did not put his words into action, thus missing out the chance of cheap valuation during the global financial crisis!

FFN: What was your life like before investing and how is it now?

Ken: My belief was to work hard like any normal employee while getting my pay cheque every month.  However, I found that my life was no different than a rat on a wheel.  When the motion stopped, my income drastically dried up.  And how would the rat survive?

Now, I am delighted to create multiple streams of income via dividend from my shares, my full-time job and other ad-hoc tasks.  I do not need to solely depend on a single source and worry strongly about the financial lid.  The key is to ensure that you are managing your investment like a holding company where the firm, like yourself seeks opportunities to grow her bottom line – for example enter new markets (new source of income such as buying assets to create more assets).

FFN: Where and how do you look for companies to invest in?

Ken: The world is full of information. However not many is able to extract the essence and develop into an investment thesis. You do not need to be a qualified analyst.  Look around you and notice that we live in a marketing zone.  The various products and services offered would paint a trend as demand increases for specific goods. For example, luxury timepieces and jewellery are well sought after, not just the wealthy but the growing middle class segments as their wages rise across Asia.

Therefore, prior observation may help.  Another possible way is to pick out top five reading sources to grasp investment ideas. These are your daily newspapers, online journals to short business articles. Pick up an interesting commentary from your top five, write it down, reflect and find out the growth drivers behind it. Do you understand about the story and where this leads to?

This would help to start off a topic of your interest (if you know what’s going on) and probably the next potential story to reap future returns while Mr. Market has not taken any notice yet.

FFN: You are well-known for your brand of qualitative analysis. What are the things you look out for when researching into companies?

Ken: To put it short on qualitative basis, I would ask the basic questions first such as how does this business operates, the origin of their revenue, how majority of the company funds are spent, the company track record and in what way does the management plan to take the company forward (forecast).

Most importantly, what’s special about the firm’s capabilities such that the drawing power to generate revenue is great?  For instance, it could be cost leadership to product differentiation.

Combine with the state of the industry to future trends expected, so that you will gain a wider perspective.  Lastly, if you can, don’t be an armchair researcher only.

Talk to professionals in the particular field, invite them for coffee or link up with them via social media, so that you can ask questions (give something in return like a barter trade).  Cross-regulate the details with your primarily observation and secondary research.

The truth is – if I do not understand the dynamics of the above, I will not be able to comprehend their business model.  I will invest through my circle of competence and key areas that I know well.  At least, I will sleep comfortably and focus my energies on other worthwhile things in life!

FFN: What are the mistakes you have done pertaining to investing and what are the lessons learnt?

Ken: When I first started, I bought into shares of companies based on the recommendation of brokers.  I did not realize the true nature of certain businesses such as soy-based businesses.  What made it worse was I did not exit early and that the advice by analysts changed fast.  When I reflected back, I realized that my knowledge in this field was minimal.  Furthermore, I did not stick to my principle but was lured to the promising returns by looking at the depressed share price only.  The price went lower and lower and I sold it at a loss. Eventually, the company was suspended from the stock exchange due to corporate governance lapses. I believe the fundamentals of the company to the business model remains essential in the first step towards sound investment.

FFN: What psychology do people need to succeed in investing?

Ken: Be confident of your own abilities in investment and avoid the market noise. If you have a sound plan and did prior research, stick by it as you know your strengths well.

Wealth comes at a price, not a gift.

FFN: How has the investor in you evolved over the years? 

Ken: I have learnt to invest based on my strengths, not to overly diversify and to void out the unnecessary destructive market noises.  You just need a few “ultimate winners” in your portfolio

FFN: What advice would you give for beginners who want to start investing?

Ken: Set aside a small fund to buy up the common shares of the companies.  The objective is not to make a profit but to put your strategy into real-time action.  Through the experiences and mistakes made, you can find out the type of investor profile while polishing your investment skills.  Then, you can cater the relevant asset class to your goals and expectations.  You can have a wonderful reference figure to learn and replicate but your investment style is uniquely YOU.

FFN: What do you thing is the biggest misconception people have about money?

Ken: To be rich is to take shortcuts and this explains why money scams exist always!

FFN: What is the one thing, in your opinion, do people need to succeed in investing?

Ken: EDP– Effort, Patience, Discipline

FFN: A parting shot for the readers?

Ken: Have fun while investing because true interest breeds success

Ken pens his thoughts at his own investment blog at http://www.ktwealth.blogspot.sg. Do visit it! 

Coffee With FFN and Ser Jing

SJ

Ser Jing is a 25-year-old student-of-life with a passion for investing. He loves reading up on the subject as well as books relating to sociology, psychology and even technology. To him, investing does not exist in its own bubble. Therefore, wide-knowledge of what makes the world tick might sometimes throw up some really interesting investing ideas or improve his thoughts on the theories on finance. Outside of investing, he loves to spend time playing football and music, hanging out with his family and friends and travelling the world. There is nothing more exciting for him than scoring a goal, strumming a chord or diving into the deep blue sea – apart from finding that elusive 10-bagger of course!

FFN: At what age did you get started in investing? 

Ser Jing (SJ): I started learning about investing when I was 18 and started really investing when I was 23.

FFN: How did you get interested in investing and who inspired you to get started?

SJ: During my first year in Junior College, I was taking Economics as one of my mandatory subjects. I did not quite believe the assumptions that were being made about how people worked with money. One particular assumption I still remember even now was – when people have discretionary money, they buy bonds. I doubted that assumption and started to look for people who really understood money and worked well with it. I had a natural disdain for the hubris and fast-pace of trading activities, something I had a little experience with while watching the grown-ups. This eventually led me to Warren Buffett, who counseled that there was a business behind every stock-symbol. He had a famous mentor, Benjamin Graham, who wrote a book called The Intelligent Investor. I wanted to purchase it but when I finally went to a book store, I had forgotten Benjamin Graham’s name and bought another book with Buffett’s printed recommendation on its front page. It was Common Stocks and Uncommon Profits, written by Phillip Fisher.  It was then that I realized that Buffett had two mentors and one of them was relatively less well-known.

I read the book and though it was not easy for me, it gave me an excellent education on the finer points on stock-investing. It has since become one of my investing-lode stones. So, Phillip Fisher was my first inspiration to the world of investing.

My next big inspiration would be the entire community at The Motley Fool. I discovered Fool.com in 2010, when I was in a summer internship. At that time, my interest in investing had waned but reading the articles and participating in the forums at The Motley Fool brought back the fire and I have not looked back ever since.

So in all, I would say I have two main inspirations – Phillip Fisher and The Motley Fool.

FFN: What was your life like before investing and how is it now?

SJ: My life before learning about investing was that of any other normal student. I love football and music and just studied normally to attain my grades. When I started learning about investing, and about all the different great investments, which are not-by-chance, great companies doing great things for society, I started to think hard about what I wanted to do. I came to the conclusion that I should really try to be involved with people and activities that I love, as much as possible – let passion take the lead, as one of my investing buddies would tell me.

Now, I also spend a lot of time reading and thinking about investing. I look at ‘shopping’ differently, thinking: “This brand looks great, can I buy parts of the company?” Besides having audacious goals (which might not be achieved) with regard to being involved in investing in any capacity, my life has not changed much. I might have perhaps become a little stingier with money because I would often think of how much more of a company I can purchase if I had not spent my money on a certain article of clothing or an expensive meal.

FFN: How do you choose which stocks to invest in? What are some of your strategies?

SJ: Most of my stock purchases come from recommendations made by The Motley Fool’s Stock Advisor subscription service. After they make a recommendation, I would read through it and then do my own due diligence. How has their balance sheet changed over the years? Have they been producing meaningful Operating Cash Flow as well as increasing it materially over the years? Is their business capital-intensive? What are their earnings like during recession years? Does the business have a wonderful brand to leverage upon or does it have a strong economic moat with pricing power? Is management allocating capital wisely (in terms of dividend payments, retained earnings or acquisitions)? These are some of the questions I ask myself about the company before I make a purchase.

A more detailed criteria is as follows, in addition to the questions I ask myself:

1) Earnings: The company must be making a profit, and have a nice up-trend in their earnings over time.

2) Revenue: The company’s revenues must be increasing over time as well, because the most powerful way a company can grow is to make more sales.

3) Cash Flow: The company must have consistent and strong cash flows. I will generally stay away from companies that have earnings but no cash flow because chances are high that such companies might be playing accounting games and I have no interest participating in such games with them.

4) Clean Balance Sheet: Preferably, the companies must have more cash than debt. Sometimes, I might make individual judgements on companies that have more debt than cash, but by and large, I prefer companies with more cash than debt. Being in a net-cash position would ensure the financial survival of a company in horrible economic times without having to sell off any of their money-making assets or worse, declare bankruptcy.

5) Evidence of economic moats: This is the most ‘squishy’ subject and to be honest, is almost entirely subjective. There are numerical clues, such as the company’s Return on Equity and Return on Net Tangible Assets that might let me know if it has a strong economic moat. Generally, the higher the Return on Equity, for a company that has a clean balance sheet, the stronger the possibility of it having a strong moat. Economic moats can come from other things like having a strong brand, great management, pricing power or being a low-cost producer.

If the companies fulfil these criteria, I would consider them for purchase because I have yet to determine if the value of the company is attractive in relation to its stock price. If the value of the company, as measured by its PE is generally attractive after consideration of its prospects, I will purchase them. I then monitor them through the community forums in Motley Fool as well as keeping track of their quarterly and annual results. The Motley Fool’s community forums are an unbelievable source of great information. I have learnt a lot from the forums and depend on them for a lot of my ‘scuttlebutt’ research, particularly since I am investing in companies that are in the USA.

I tend to also invest in companies more than once. I copied this strategy from one of my favourite analysts in The Motley Fool, Thomas Engle, who also gave an interview on your blog. After I invest in the company at a particular PE, I will look to invest in them again over a few quarters or years at an even better value point, again measured by PE. The better value point could be achieved in different situations such as the stock price of the company not keeping up with earnings, or it could be market volatility that drives the stock price down without any changes in the fundamentals of the company or an over-reaction by the market with regard to temporary slow-down in earnings growth – these are all great times to add to my initial stock purchases.

After reading the writings of Howard Marks (a professional investor whom I really admire and follow) of Oaktree Capital, I have also come to appreciate the power of cycles in the economy. So, in that regard, I look at the overall S&P500 current PE ratio as a proxy for the state of overall market valuation. Bear in mind that during the dot-com bubble, the S&P500 PE went to 45. During the 1960s, it was in the high 20s when Warren Buffett eventually closed down his partnership because he could not find bargains. The S&P500 PE ratio was also approaching 25 when the Financial Crisis in 2008/2009 hit. These historical benchmarks can allow me to think of setting aside a cash cushion by lightening my stock positions based upon overall market valuation.

However, by and large, I am a firm believer that society improves as the years progress and so, the world gets richer and we should have meaningful portions of our wealth be placed in companies that can compound it for the long-term.

FFN: What are some of the stocks in your portfolio currently?

SJ: Most of the stocks I own are in the US market and they include Apple, Panera Bread, Chipotle Mexican Grill, Dolby Laboratories, Activision Blizzard, Netflix, Ford and Berkshire Hathaway among others. The only local company that I have a part ownership of is Kingsmen Creatives.

FFN: Where and how do you look for companies to invest in?

SJ: As mentioned earlier, I rely on the Motley Fool a lot because I have a team of very honest and intelligent professionals who screen through the universe of USA-listed stocks before making a recommendation to me. I then apply my own admittedly less intelligent thinking to it before selecting from that pool of recommended stocks.

I have also had the fortune, over the past few months, of being acquainted with a group of excellent individual investors whom I now correspond with regularly through email or in person. They have clued me in to some potentially great investments, which you are a member of.

I am also constantly on the lookout for better stock screeners or forums and have recently discovered Joel Greenblatt’s excellent Value Investing Club. I have not had much time to properly go through the various posts, but will eventually make time to do so.

FFN: It is always good to have an investing group that meets up regularly to discuss great companies and share ideas, especially if that’s done over a beer!

What are the mistakes you have done pertaining to investing and what are the lessons learnt?

SJ: Yes, good beer and company really goes well! I mentioned Ford as one of the stocks as I own and it in fact has been one of my greatest losers. I purchased it without realizing it had a Credit Arm to its business, which in essence, meant that I was buying a stake in a company that was making and selling cars and making loans. At this stage of my investing life, I am still unable to understand the balance sheet of financial institutions. I made a mistake with Ford because I purchased it without understanding the whole scope of its business, and invested in it purely on the back of Motley Fool’s recommendation. That is not to say that Motley Fool made a bad recommendation – it was a mistake on my part because Ford was probably not an investment for me. I have since learned to not invest in companies that I do not have a good understanding of.

I will continue to hold Ford because I believe in investing for the long-term and in doing so, helps train my temperament because I only invested in Ford slightly more than 2 years ago, which in my book, is a short-time in investing.

I have also made two-fold mistakes with regard to valuation and timing of purchase. I purchased companies at PEs that were a little too high because I was greedy to have a stake in them and I plowed my desired dollar allocation into them at one shot. I have since learned not to do so, as mentioned in one of the earlier questions.  It is ok to purchase great companies at slightly richer valuations provided there is more money on hand to take advantage of further mispricing when prices fall.

Lastly, the cleanest balance sheet coupled with the nicest historical trends in earnings and cash-flow would not mean a thing if the company’s growth path has been permanently snuffed out. I might have made such a mistake by investing in Dolby Laboratories, which generates a significant amount of its revenues from supplying audio-coding technologies to PC makers. As most of you might have realized, iPads, Macs and generally tablets have been slowly taking over the world and might even supplement PC usage. This would mean that Dolby’s room for growth might be permanently stunted. Even though they have started to provide similar audio-coding technologies to mobile-devices, it is still insufficient to make up for the PC makers decline. In essence, Dolby’s path to growth has been blocked – whether the obstacle is permanent or not, time will tell. It is a potential mistake that I watch very closely.

What I have learnt from this mistake would be to actually think carefully about the potential for quality-growth in sales, earnings and cash-flow of companies that I am invested in and not just invest in them based on the strength of their financial statements.

For what it’s worth, financial statements are backwards looking and even though past-performance of a company can often be reliable clues for future performance, it pays to also think about what the company can do to continue their success.

FFN: What psychology do people need to succeed in investing?

SJ: I think any investor would benefit himself/herself greatly if they were to read up on behavioral finance or behavioral psychology in general. Behavioral finance is a sub-set of behavioral psychology and these disciplines essentially study how our brains are hard-wired to follow certain predictable behaviors that are generally thought of as un-rational in hindsight.

For example, an often repeated investing adage would be to ‘buy low, sell high’. However, when the markets are really falling, can an individual steer himself to make stock purchases? He/she might say ‘yes’ during the good times, but when the bad times come rolling, the answer would most probably be ‘no’. This is because of an empathy gap where we fail to imagine how we might think and feel when we are in a different mental state. To mitigate this problem, professional investors like John Templeton actually calculates prices of stocks which he thinks would make bargains during times when the markets are good. When things get really ugly, he uses the list to override his emotions.

Knowing that we are predisposed to certain financially harmful behaviors can allow us to come up with safeguards to enhance our investing activities.

Another important aspect of psychology involved in investing would be a contrarian mindset – being able to buy when everyone is selling and vice-versa. It might sound easy, but behavioral psychologists have found that the ‘mental pain’ of being a contrarian activates the same portions of the brain that processes physical pain and so, it might not be as easy as we think. This helps to reinforce the idea that we are doing the right thing even though we might feel real uneasy when investing in times of pessimism, be it an overall market correction or individual company malaise.

FFN: How has the investor in you evolved over the years?

SJ: Truth be told, I have only been investing seriously for 2 years. But there have been changes to my approach, the most important one being investing in a company over different value points.

I am also learning all the time and would want to be able to better identify growth potential in companies. The power of compounding at 15% over 30 years is truly amazing – and if identified correctly, a company that can grow its earnings at that pace for decades, would make it a truly awesome investment.

FFN: What advice would you give for beginners who want to start investing?

SJ: Read Peter Lynch’s One Up on Wall Street! Then, continue reading more about the different flavors of investing in businesses. You will find different investors like John Neff, David Dreman, or even Warren Buffett, who all have different leanings toward investing. But by and large, they are patient, contrarian, have long time horizons and most importantly, study a business. I constantly remind myself that investing is the study of the value of a business and it is a message that I would tell any of my friends who would want to start out in investing. The different strategies toward investing can all work, provided they are based on a logical foundation and it would just be a matter of finding the strategies that you find yourself comfortable with.

And never forget that time is on our side. The big institutions and ‘smart money’ have much shorter attention spans and we can use that to our advantage. Jeff Bezos, CEO of Amazon, once said: “Our plans are always on time horizons of 5 to 7 years, because when we look that far ahead, suddenly, all our competitors disappear’’. I feel it is applicable to investing as well, and so, patience is a virtue here, my friend!

FFN: What do you thing is the biggest misconception people have about money?

SJ: I have no particular insight toward money per-se because it has never been that important to me. I view investing like an intellectual challenge and it is a great plus that it can bring me financial rewards. However, I have never thought of money as being hugely important to the quality of my life. I like fine meals and nice clothes once in awhile, but if I can get to dive once or twice a year, play football and music regularly, hang out with my friends and work in a job that is meaningful, I am a happy person.

If I change the question slightly to ‘the biggest misconception people have about investing?’ my answer would be: The biggest misconception that people have is that investing requires huge capital to start off with. That is wrong because small amounts invested regularly can grow into meaningful wealth. With a long-time horizon, and finding companies that can grow at double digits for years, the power of compounding can work in our favor and deliver great wealth.

FFN: What is the one thing, in your opinion, do people need to succeed in investing?

SJ: Patience is the one thing I think people need to succeed. Investing in great businesses needs time to work out because as Buffett says ‘Time is the friend of the wonderful business, but enemy of the mediocre’. With time, the great businesses get recognized and their value eventually gets reflected in their share price – more often than not.

FFN: Can you sum up your investing philosophy in 10 words or less?

SJ: Buying great businesses for the long-term.

FFN: A parting shot for the readers…

SJ: Health is our greatest wealth. In every festive occasion such as Chinese New Year, Christmas or weddings, I always say: Stay Healthy, and Be Happy. That’s all that matters =)

Do visit Ser Jing’s blog at http://beta.fool.com/serjing/ where you will find great posts on investing. He has also won Editor’s Choice Awards for some of his quality posts! 

Coffee With FFN and “The 21 Year-Old Investor”

This interview involves a 21 year-old investor (he prefers not to reveal himself) who has discovered his undying passion in investing and believes in the value investment philosophy. He likes to buy excellent businesses that are able to compound their earnings over a long period of time. He runs his own investment blog and frequents the Valuebuddies forum. He also has a knack for unearthing information off the internet about his favourite companies, to the astonishment of other forum users.

FFN: At what age did you get started in investing? 

The 21 Year-Old Investor (TTYOI): I started at the age of 20.

FFN:  How did you get interested in investing and who inspired you to get started? 

TTYOI: I seemed to have the impression that the stock market is where one can earn great wealth by buying low and selling high since young from maybe the TV drama serials. I had a chance at it when I was 16 as my school was organising this virtual stock competition. I didn’t really know what the stock market is about as well as all the various terminologies. The competition occurred during 2007 and during the final day, stocks tumbled down in one single day and the winner of the competition was the one who had their positions in cash. The one lesson that I have learnt then is the stock market is very risky and one can suffer huge losses in a single day.

While I was in the army, I tried to read up about investment through books like the dummies as I have the intention to have a go at it once again. I started reading up only in my second year where there’s more personal leisure time. I eventually created a trading account and bought my first stock in September 2011 which was a tumultuous time.

FFN: What was your life like before investing and how is it now?

TTYOI: My life was drastically different ever since I started investing. In the past, I have always been unable to come up with an answer whenever people ask me what I want to do in the future. Now, I am very clear that investing is what I want to do for the rest of my life until my mind starts to fail me. I have found a passion.

It has also slowly shaped my characters and perspective. Patience, focus and long-term view are stuffs which I have learnt during this journey. Regardless whether one is an investor, management or owner, these 3 traits seemed to be a common point for those who have achieved success. I do incorporate them into my everyday decision making process even in non-investment related things.

FFN: How do you choose which stocks to invest in? What are some of your strategies? 

TTYOI: I am a bottom-up investor that is heavily influenced by the style of Warren Buffett. Hence, I try to look for great companies that have the capabilities to generate high return on capital for a long period of time. Great companies are indeed very rare and in most cases they will be overvalued.

ROE is therefore one of my most important criteria and I love to use the Du Pont Ratio to evaluate the component of the company’s ROE. You rarely have a company with a wide moat having a low normalized ROE. Personally, I will also prefer a clean balance sheet as Black Swan will always happen and you do not want your company to face financing problem. I have since started to come to term with having some amount of debt so long as the company should have no problem repaying them even in unfortunate circumstances. High Free Cash Flow Yield is also very important and is often one of the common traits of great companies. If a company has to constantly pump in half its net profit to maintain its business then it means that you are only getting half the cash return as an owner of the company. Decent dividend yield is a good to have but not a must, as I believe it can provide some form of cash flow and return while an investor is waiting for the long haul.

In term of the qualitative, that will be to find a company with a great moat. In most cases, a high return on capital will attract more competitors who are willing to accept a slightly lower return than one does. In such a case, competition will be such that no one is able to earn supernormal profit for a long period of time. The period of time of which a company is able to earn return above their cost of capital is called the competitive advantage period (CAP).

Companies with great moat are then able to fend off competitors who are seeking to erode their returns. Some of the commonly cited moats are high switching cost, network effect, government regulation, monopoly power (not monopoly) and lowest cost structure. However, we have to keep in mind that they will still be constantly attacked upon despite their moat. Some of these moats can also be illusory and temporary which requires the judgment call of the investor.

Thus, I have to admit that this method is riskier than the traditional Graham’s approach of purchasing below book value and cash. Firstly, an investor can make a wrong call on what seemed to be a moat. Secondly, disruptive technology can make the business obsolete as seen from the case of Nokia and Kodak. Thirdly, as they have high ROE, it will almost be certain that you will be purchasing at huge premium over its book value due to the equation of PER X ROE = P/B. A stock with PER of 10 and ROE of 20% is essentially trading at 2x Book Value. In such a case, you are paying for future growth in book value which might not happen unlike buying a company at a huge discount to book value where only losses can slowly erode their book value. The stock will then potentially have a huge downside.

FFN: What are some of the stocks in your portfolio currently? 

TTYOI: Boustead, SIA Engineering, Silverlake Axis, VICOM, The Hour Glass. I am looking to accumulate more of Boustead and THG.

FFN: Where and how do you look for companies to invest in?

TTYOI: As mentioned earlier, I am a bottom up investor so I have to search for companies one by one. I try to screen for stocks with high ROA (min 10%) and ROE before I research on the potential company’s prospect. I also try to look around for the better businesses out there – there’re quite a number of them right in your supermarket. Valuebuddies is also a great platform for people to uncover some of the gems.

FFN: You are well-known for getting information of companies from the internet easily. You dig deep. How do you do it? 

TTYOI: Because of my riskier investment style, I will feel comfortable investing in a company only if I really understand the company as much as possible. Main sources will include IPO Prospectus, Annual Reports and Company’s websites. These are really amazing source of information though many people do not read them. Competitor’s annual report or prospectus can also be very useful.

Beyond that, you have to search through Google pages by pages. In fact, I can go up to 50 pages just to find a single piece of information. Change your search term and start the manual digging again. Often, you will be able to find some information that will lead you to even more information. It can be some important authoritative report or a specific jargon for that particular business.

Sometimes, I also employ some unorthodox techniques like emailing or calling up the company, their competitors or some other organisation in the identity of customers, students and e.t.c. AGM is also a very important avenue for it is the one day each year that the management will be bothered to discuss about the company with you. Being well-prepared for AGM is essential for one to reap its benefits.

It helps if you read a lot so that you have some idea of what to look for in every sector.

FFN: What are some of your favourite investing books?

TTYOI: Intelligent Investor, One Up on Wall Street, Black Swan, The Little Book That Still Beats the Market, Buffettology, Your First Million, Common Stock Uncommon Profit

FFN: What are the mistakes you have done pertaining to investing and what are the lessons learnt?

TTYOI: All sort of mistakes have been made – Buying on rumours, buying without doing FA, selling on fear, buying on greed, failed to cancel order when changing order, speculation. Lesson learnt is probably that mistakes are inevitable and investor should learn from it. I am sure that my list of mistakes will continue to expand in the future.

FFN: What psychology do people need to succeed in investing?

TTYOI: One needs to learn to control the greed and fear within oneself. Losing control of emotion will lead to buying high and selling low instead of buy low sell high. Independence of thoughts is also very important. If one is not willing to stand by his idea and choose to follow the market, he will at best get a mediocre return. Only by going against the general market, can one possibly achieve above market return.

FFN: What advice would you give for beginners who want to start investing?

TTYOI: Start now, make mistakes and learn from there. Investors grow when they learn from their mistakes and not when they make profit.

Always be humble and understand that there’s too much to be learnt out there from everybody.

FFN: What do you thing is the biggest misconception people have about money?

TTYOI: That money is the end. To me, money is merely a mean to an end and in the race for it many people lose focus on what is it that they really want. It is important to know the purpose of making money.

FFN: What is the one thing, in your opinion, do people need to succeed in investing? 

TTYOI: Temperament

FFN: A parting shot for the readers… 

TTYOI: A quote by famous trader Jesse Livermore: “The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.”

Ironically, he did die poor as he did not follow his own rule at the end. Have fun investing =)

Visit the interviewee’s investment blog at http://sgyounginvestor.blogspot.com where he shares many great ideas and researches on companies.