My Investment Philosophy

I have been investing since I started working in 1998. And having written many articles on investing, markets and funds, I was actually a little taken aback when I was asked to write about my own personal investing experience and philosophy. In any case, here goes and I hope readers would find this useful.

When I started working and investing in 1998, I already had the idea that I wanted to put my money to work for me. At the same time, my first job kept me relatively busy and I felt that I did not have the time to monitor stocks so closely. I found out about unit trusts and to me, they were a good investment option because they did not require as much monitoring as stocks, and better still, they allowed me exposure to all sorts of markets and sectors.

I started out with just one or two funds only. And like most investors at that time, I made my purchase by walking into a bank and talking to the staff there. I was perhaps fortunate because there was a rise in most equity markets from 1998 to 1999, so my first fund purchase experiences were a positive one. This reinforced my interest in unit trusts and investing. As my interest grew, my dissatisfaction with the advice provided by the relationship managers at the banks grew. It seemed like there was always a new product for them to sell, and that product would be the “flavor for the month”, and hence, the buy for the month. Yet, when asked about the underlying investments and the markets in greater details, they were not able to give very good answers at all. Also, once they realized that I was not a customer with tons of money to invest, they were not inclined to spend much time entertaining me.

I took to reading investment books to improve my knowledge about how investments and markets worked. It was in 1999 that I discovered Fundsupermart.com on the Internet. It had only been launched relatively recently, but it already had more information at the click of a mouse than what the bank relationship managers could tell me. It was also far more convenient to get that information from the Internet than to actually go to the bank in hopes of finding any bank staff that would be able to answer my questions on the market. I started visiting Fundsupermart.com frequently, and I was one of the more active posters on the forum as well.

Chung Chun, one of the two main founders of the company, noted my postings on the Fundsupermart forum. He took the opportunity to meet me and found that at a time when the unit trust industry was still very young in Singapore, I was very interested in unit trusts as well as in markets, and knew quite a lot about them too. He thus asked me to come onboard. I welcomed the opportunity to be able to devote more time to analyzing markets and accepted his offer, and thus my career in the investment world started.

Today, I continue to invest, primarily into unit trusts, just as I've been doing since 1998. There is still more to learn and discover because the investment world is always changing, and there are always new things happening that might affect markets. However, from my 9 years of investing, as well as from my own research and analysis into markets, here are some of the more important points that I believe an investor should take note of.

Firstly, I believe that one must have faith in the long term ability of markets to deliver a good return. There will be good times and there will be bad. In 2000, many markets started to decline and this slump extended all the way till 2003. Yet, throughout this difficult time, not only did I stay invested, I was adding to my fund investments whenever I could. I then reaped the benefits after markets bottomed out in 2003 and rose. Part of this was because I had analysed the past history of many markets. One trend always stood out, and I have written about this in a number of articles. The trend was that despite events that would have people think it was safer not to invest at all, the world generally survives through all those crises, and markets bounce back and recover soon after that. I am sure being an investor during World War II, or the first oil crisis, would have been far scarier than anything we have seen in recent times, and this is one of the reasons why I remain unfazed by the recent market corrections that happened in May 2006. If markets that have crashed can recover from a global world war, then the correction in markets from profit taking due to an interest rate hike is far less scary.

Secondly, I believe that it is important not to get too emotionally affected by markets. Perhaps many investors have previously come from a stock trading mentality. Also, in today's Internet age, any alarming news gets extensively covered by the media and spreads around the world very quickly. Thus, when there are newsworthy concerns with the markets, these tend to capture many investors' attention. While it can be very disheartening to see your investments shrink everyday during a market slump, over reacting is not good for the long term return of your investments. You see your investment drop 10%, you panic and sell out. During market downturns, the fear is that if this keeps on going, you will lose all your money. This is similar to the greed that often takes over when markets are going up. Seeing your investments balloon in value often makes you think you are a better investor than what you might truly be (in actual fact, it is simply because all markets are going up). The desire to “get in” before it is too late also then leads to rash decisions. In the end, especially when dealing with markets and investments, it is best to keep cool and be as objective as possible rather than to go based on one's gut feel or emotions. There were times in the year 2000 and 2001 when I did not even want to look at my portfolio because markets had fallen yet again. However, I kept calm during those turbulent market slumps. It might surprise some of those who read this, but over the years of my investing history to date, I have not made a lot of big switches to my portfolio. I was never “in cash” this month, and “in the market” the next. Throughout the troubled times from 2000 to 2003, I stayed almost fully invested. Did it affect my returns during that time? Perhaps, but this also meant that when markets truly bottomed out in 2003, I was still fully invested and was hence able to capture the full upturn in markets after that.

Thirdly and lastly, humility is a great trait to have when approaching markets. Even though I look at markets, and I am asked for my views, I am aware that it is impossible to be right 100% of the time. This is why I practice what I preach, and I have a diversified portfolio. The reason is because no matter how confident you are on a particular market, it could always surprise you. And usually, there would be more than just one good place to invest into, so rather than putting everything (including your ego) on the line in a huge bet on one market, it is generally better to be diversified and spread your bets. Investing is a journey. You will be investing all the way until you retire and beyond. It is not a gamble where you win big one time and never have to worry about investing again. Because even if you suddenly have a large sum of money, if you have not learnt the proper lessons of how to manage it well, it will soon be gone just as quickly as it came. This is why you have heard of rich businessmen and rich investors, but you rarely hear about rich gamblers. Because if they became rich through gambling, then it is a sure bet that eventually gambling would take away their riches again. Thus, it is better not to treat investing as a chore, or as a big gamble where you hope to get lucky, but rather to treat investing as a journey where you can constantly learn new lessons. This way, you will pick yourself up after every loss and learn from your mistakes and become a better investor for it.

These are some of the most important things I have learnt about investing. I am sure there will be more as I go on. While they may not be concrete tips on which market is the best one to buy into this year or the next, they will be more important in the long run. These are some of the key investment philosophies I follow with regards to my own investments - I hope that our readers would find them useful.

Wong Sui Jau
General Manager, Fundsupermart.com