Business Times Interviews - Starting Young

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When I saw this article on the papers, I was totally speechless. Although there should be freedom of speech, but its just like, morally wrong to me that such views can be published without any corrective comment, etc, from the reporter.

And how can a NUS grad not understand what's a ponzi scheme? I think its shameful to see our local grad calling stocks a ponzi scheme. By encouraging others to start a business, I guess he must be looking at building up a ponzi scheme of his own too.

For control, normal retail investors should not be able to get any market control. This is a fact. The only thing you can control is your own actions. I wonder how this "investor" can have his control in silver when he says there's no control in stocks. Hmmm...
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I thought this week's interview was hilarious haha!

I always had a low opinion of articles written by "financial correspondents" but this just takes the hat.
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(29-08-2011, 10:10 AM)kazukirai Wrote: ...
I've also been thinking about Stocks vs Business and maybe Buddies would like to share their views. If we see Stocks are ownerships in Business, and usually Businesses that get listed usually have some form of successful operating history before listing, would you not consider a Listed Co. as a less-risky business than a start-up?

After all, a business operating for some time will have the advantage of knowing the industry, an established clientele, good relations with suppliers etc. Compared to a startup, you have to build all these relations with customers, suppliers, regulators etc from the ground up.

Of course, one would naturally expect a premium to be paid for a listed co. hence, Graham always reminds us, "At what terms and what price?" But if the price were attractive enough, why would I go for a start-up vs. a more established entity?

I concur with your views. Listed companies are basically incorporated businesses and are definitely less risky than start-ups. (excluding those companies that have yet to turn profitable, but are going for IPOs)

But then again, my personal tendency is to avoid IPO's. Cause they're kinda like start-ups / new companies to the listed world. Its hard to predict during the start / pre-IPO whether the company and its directors will be able to handle the pressures of being a listed company, with all the compliance issues as well as market pressure, etc.

What do you think?
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Of course the efforts and risks of buying listed shares are much lower, that's why the returns you get are much lesser as well. No risk no gain.
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(29-08-2011, 01:42 PM)exige Wrote: But then again, my personal tendency is to avoid IPO's. Cause they're kinda like start-ups / new companies to the listed world. Its hard to predict during the start / pre-IPO whether the company and its directors will be able to handle the pressures of being a listed company, with all the compliance issues as well as market pressure, etc.

My short answer is: As an investor, I would avoid IPOs too.

I read somewhere (I think it was in the edition of The Intelligent Investor with commentary by Jason Zweig) that IPO stands for It's Probably Overpriced and that I think is a pretty good way of remembering it.

All we have to do is ask ourselves this- "If we own a business, when do/should we sell whole/part of it? During good times or bad times?" I'm pretty sure all rational people will say "During good times." And prior to listing, the company seeking listing will have Investment Bankers and Consultants advising it on how to best present itself.

Therefore, my problem with IPOs is not so much that Management will fail in execution of current or related expansion but Valuation Risk- I don't see a high probability of buying the business or part of it at an attractive price when it IPOs.

People who are good at reading the madness of the crowds or have particular insight into the business and its industry will probably beg to differ though.
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(29-08-2011, 02:07 PM)kazukirai Wrote: My short answer is: As an investor, I would avoid IPOs too.

I read somewhere (I think it was in the edition of The Intelligent Investor with commentary by Jason Zweig) that IPO stands for It's Probably Overpriced and that I think is a pretty good way of remembering it.

All we have to do is ask ourselves this- "If we own a business, when do/should we sell whole/part of it? During good times or bad times?" I'm pretty sure all rational people will say "During good times." And prior to listing, the company seeking listing will have Investment Bankers and Consultants advising it on how to best present itself.

Therefore, my problem with IPOs is not so much that Management will fail in execution of current or related expansion but Valuation Risk- I don't see a high probability of buying the business or part of it at an attractive price when it IPOs.

People who are good at reading the madness of the crowds or have particular insight into the business and its industry will probably beg to differ though.

haha, I'm reading the Intelligent Investor with commentary by Jason Zweig, and I saw the "Its Probably Overpriced" phrase too. Quite funny, but reasonably true..

Btw, what kind of stocks are you holding on to? ie: which industries? Saw that you have 55% in SGX-listed equities
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(02-09-2011, 05:25 PM)exige Wrote: Btw, what kind of stocks are you holding on to? ie: which industries? Saw that you have 55% in SGX-listed equities

Hi Exige,

I have a healthcare REIT, some manufacturers (industrial) and more recently, I've been going into defensives (a telecom, a holding co., airline services and a retailer to kiasu Singaporeans).

I started off buying stocks based on big macro ideas, then once I had a 'sort-of' idea of how to read Financial Statements, I started using more of that. Now, I'm starting to find a balance between the two.

How about yourself?
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(03-09-2011, 11:16 AM)kazukirai Wrote: Hi Exige,

I have a healthcare REIT, some manufacturers (industrial) and more recently, I've been going into defensives (a telecom, a holding co., airline services and a retailer to kiasu Singaporeans).

I started off buying stocks based on big macro ideas, then once I had a 'sort-of' idea of how to read Financial Statements, I started using more of that. Now, I'm starting to find a balance between the two.

How about yourself?

wow.. Sounds like you have quite a sizable portfolio.
I'm holding Raffles Medical Group, an offshore support company, an industrial company, Berkshire (B shares), and about 10-15% currently in cash. Used to own Robinson shares for a period of time (wanted to hold on to it indefinitely, but it got acquired)

Regarding retailer to kiasu Singaporeans, are you talking about H&M ? haha.. (Just joking...cause the crowd at H&M's Orchard store on Saturday was certainly insanely kiasu!)

What kind of "big macro idea" were you investing based on? ie: Based on industry sectors?
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(05-09-2011, 01:47 PM)exige Wrote: wow.. Sounds like you have quite a sizable portfolio.
I'm holding Raffles Medical Group, an offshore support company, an industrial company, Berkshire (B shares), and about 10-15% currently in cash. Used to own Robinson shares for a period of time (wanted to hold on to it indefinitely, but it got acquired)

Regarding retailer to kiasu Singaporeans, are you talking about H&M ? haha.. (Just joking...cause the crowd at H&M's Orchard store on Saturday was certainly insanely kiasu!)

What kind of "big macro idea" were you investing based on? ie: Based on industry sectors?

Ahaha, not as sizable as yours. I just have fingers in many pies. I'm interested in BRK.B as well but that's from me as a fanboy.

The retailer to kiasu Singaporeans I'm thinking of is actually of is Popular. I have no doubt that the digital retail place will make traditional bookstores like Popular (unless they evolve) obsolete one day but I'm betting that that day has not come in Asia and won't for a while longer. Meanwhile, Popular has that added buffer of kiasu parents who will buy heaps of assessment books and study guides and that will be a crucial mitigating factor.

Big macro ideas would include the broad strokes of the brush such as an aging population in SG (which is why I bought into the healthcare REIT), or the propensity for more people to eat out, decline of low value-add manufacturing in SG etc. Basically, these are trends that are unlikely to reverse and even if they do, it would do so very slowly.

How was your investing process like?

PS: The queues at H&M were crazy. I thought they were giving away free clothes or something.
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Wow rich kid. At 22 he has a 7-figure portfolio?? Maybe his dad's money? It will be impressive if it was indeed all his! And what with all the talk about alpha and beta....I really don't understand Greek Letters - maybe he should start to actually invest instead of talking about passive funds, value-at-risk and other arcane concepts.

Then again, he thinks picking stocks are useless. I guess he is a very good student of the EMH! Tongue

Business Times - 05 Sep 2011

STARTING YOUNG
Gaining his father's trust


Daryl Chia sold off half his father's portfolio and hedged the other half with put options, saving him a few hundred thousand dollars in losses, MICHELLE YEO reports

WHILE most collectors hoard antiques, furniture or art, 22-year-old Daryl Chia seeks to collect something rather different: the soon-to-be freshman at the University of Warwick wants to build a formidable collection of letters behind his name.

He started investing in 2007; and since then, Mr Chia has already picked up the title of Professional Risk Manager (PRM) and soon will be adding the titles of Financial Risk Manager (FRM) and Chartered Alternative Investment Analyst (CAIA) to his name, before he flies off to school this month.

And after that, he'll gun for a Chartered Financial Analyst (CFA) qualification, though only after he attains his bachelor's degree in Mathematics, Operational Research, Statistics and Economics (MORSE).

Q: When did you start investing and what got you into it?

A: I started in 2007. I actually took a year off junior college (JC) to practise archery so as to compete in the national team. After an injury which put me out of the team, I started using my time to read about investments, asset allocation and the Financial Times newspaper, spending up to 12-16 hours a day at times.

I was fortunate to start at a very interesting period, financially. Based on my research, I felt that there was an impending recession at that time so I went and sold off half my father's seven-figure portfolio and hedged the other half with put options, saving him a few hundred thousand dollars in losses. With that, I gained the trust of my father as well as others I was in contact with.

Q: What do your parents think of your forays into the realm of investment, especially at such a young age?

A: My parents are quite liberal in the sense that they would let me do whatever I want, including taking a year off JC to pursue archery. Of course, there was a bit of convincing to do on my part initially to give my parents an idea of my plans for the portfolio as well as my financial knowledge.

Q: Describe your current portfolio

A: It is almost a seven-figure portfolio. My portfolio can be divided into two portions. The first part seeks to maximise beta returns, but only doing so in the most efficient manner. This part of my portfolio comprises stocks and bonds in the usual 60-40 ratio. Because I think investing in mutual funds is an expensive way of gaining beta exposure, most of the stocks I hold are in passive funds.

The other portion of my portfolio seeks to gain alpha returns. Within this part, half of it is invested in funds of funds while the remaining half of it is invested in my own fund, which I use to conduct my own research.

Q: Do you actively pick stocks?

A: No, I do not engage in active stock picking at all. I believe the asymmetry of information in the stock market is quite high. Those who are in the know would have access to special information but if you are not one of them, it would be hard to get such information.

Q: What was your best investment?

A: I would say my best investment is really the investment I made in my education because I really worked very hard for it. In the field of investments, it is easy to look back at your past decisions and rationalise them into either good or bad ones when they could have purely been based on luck. I did not get education because of luck. It is something I worked hard for.

Q: And your worst investment?

A: My worst investment would be the time I spent trying to time the market and to spot the dips and bumps. A lot of cognitive biases come into play during this process.

Q: Describe your risk appetite.

A: I would say I lean more towards the aggressive side. Ultimately though, I think my risk appetite is still quite balanced and because my portfolio is very diversified, I can afford to take on larger risks.

Also as a professional risk manager, I make sure I use Value at Risk (VaR) metrics to ensure that I stay within my risk limits.

Q: What advice do you have for young investors?

A: I recommend saving up and investing regularly, especially in passive or index funds rather than mutual funds. Also, if it is financially possible, I recommend investing in a few funds of funds.

Finally, do not waste any time trying to time the market. For younger investors or those who are new to finance, I stand firmly by the 60-40 stock-bond ratio which I think is a good enough basic rule to follow. That way, you will not need to constantly keep track of the changes in the market and hope to time it but can spend your time focusing on more important things.

Q: Where do you see yourself financially in the future?

A: I want to go into either fund management or risk management after I am done with my university education.

Eventually, I hope to achieve financial freedom so that I can focus on the more important things in life such as family and friends. Q: Do you have any role models?

A: I do not have one specific role model but many. I would say I am a pretty outgoing person, and I like to make friends and network. I believe that there is something to learn from everybody, and I try to learn as much as I can from the people around me.

If you're between 17 and 30 with investing experience to share, do get in touch. E-mail btyif@sph.com.sg with 'Starting Young' as the subject heading and include your name, contact details and a short write-up on your investing story

My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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