Business Times Interviews - Starting Young

[yeokiwi]

You see the trains getting more crowded now, and with the new second line, I'm sure SMRT will have higher future profits.

My take is that further probing needed here. Why not SBS Transit (their direct competitor) or even Comfort Delgro (which holds quite a bit of SBS Transit) which operates the NEL and have been awarded the future downtown line? Is SMRT a screaming buy at current price? What are the factors for the crowds (residential population growth? tourists? what is the bigger factor and what is the factor's likelihood for further growth?)

SMRT fare increase is subjected to the approval of PTC. That by itself is a turn-off. Anytime SMRT gets an increase in profit, the next request to raise fare will be rejected. One year before the election, any fare increase will be postponed.

SMRT has very little leeway in using the station for commercial purposes. In many MRT stations in the world, the space inside the gantries are used for shops, bakeries and even eateries! Tokyo, Seoul and Taipei are doing that.

I am not sure why SMRT is not allowed to rent out the space within the gantry. If they can do it, the passengers are likely to benefit since the fare increase will be slower and can be offset by rental income.

In Japan, many railway companies also own the shopping mall above the stations. The properties help the company to subsidize part of the cost of running the railway.

This kind of half-baked private-public company is the worst. It is a private company and yet it is constrained by regulators over many aspects of how it can run the company.

[pianist]

You see the trains getting more crowded now, and with the new second line, I'm sure SMRT will have higher future profits.
SMRT fare increase is subjected to the approval of PTC. That by itself is a turn-off. Anytime SMRT gets an increase in profit, the next request to raise fare will be rejected. One year before the election, any fare increase will be postponed.
SMRT has very little leeway in using the station for commercial purposes. In many MRT stations in the world, the space inside the gantries are used for shops, bakeries and even eateries! Tokyo, Seoul and Taipei are doing that.
I am not sure why SMRT is not allowed to rent out the space within the gantry. If they can do it, the passengers are likely to benefit since the fare increase will be slower and can be offset by rental income.
In Japan, many railway companies also own the shopping mall above the stations. The properties help the company to subsidize part of the cost of running the railway.
This kind of half-baked private-public company is the worst. It is a private company and yet it is constrained by regulators over many aspects of how it can run the company.

at least smrt and sbs consistently made profit year after year...even in the deepest of the 08/09 crisis, i slept soundly knowing these transport companies will still be operating & making money.

in london, inside the tube gantries, there is no retail shops, but there are vending machines and many free daily papers..lying around the seats for the next person to read..very green and recycleable...big dogs are even allowed in the tube..

in hong kong, i think there are many bakeries shops and even internet access just like those in the airport check-in terminals

[Musicwhiz]

I vehemently disagree on his last statement in which he says he believes that "Buy and Hold is Dead"!

Business Times - 31 Oct 2011

This daredevil loves volatility

Forex and commodities excite him, reports DOLLY CHIA

WALTER Lim entered the investing world at a dangerous time - in 2008 when the collapse of Lehman Brothers threatened to bring down the global economy, not to mention leaving millions of investors burnt.

Investing was more of a hobby for Walter, then only 18, who also got a thrill from riding the ups and downs of share prices. He used his parents' names to create trading accounts, because you have to be at least 21 years old before you can open your own.

The investing daredevil loves to trade in the foreign exchange (forex) and commodities markets, which promise high returns but are also very risky - they can wipe out all your investments overnight.

But Walter survived. Today, he has increased his portfolio - a mix of equities, unit trusts, commodities and forex - by about 10-20 per cent.

Currently in his second year at Singapore Management University, Walter wants to be a trader upon graduation.

Not surprisingly, he's also an active participant in trading competitions such as the Citi Foreign Exchange Challenge and Oxyor Traders Trophy.

Q: Why did you decide to enter the market at such a turbulent time?

A: I believe in entering during the worst times as there are more opportunities available.

It is riskier, but I am still young and I like taking high risks. Forex and commodities are my favourite due to their volatility.

Q: What was your very first investment ?

A: I first invested in unit trusts using an account I created under my parents' name. I started with $15,000. All of them were local unit trusts. I have subsequently moved on to invest in equities, spot forex and commodities.

Q:What do you currently invest in?

A: I liquidated a large portion of my portfolio in August as I hold a pessimistic view of the global economy for the next two years, which has limited upside potential and high downside risks. However, I am still holding on to some of my investments.

For unit trusts, I currently invest in Nikko AM Shenton Short Term Bond to leverage on the high interest rate of the Australian dollar.

For equities, I only hold BreadTalk at the moment as I believe that it has the potential for growth due to high-margin products and overseas expansion.

I bought it at 55 cents. It's 51 cents at the moment but I am still holding it as I believe in the company's business model.

For commodities, I have investments in silver due to its high industrial demand and continued US dollar depreciation.

I have shorted the yen as it is close to its all-time high and the possibility of central bank intervention is high if the yen continues to strengthen.

Q: What was your best investment?

A: My best investment is my portfolio of unit trusts. I invested in DWS India Equity, DWS Singapore Equity, Fidelity Global Health Care, and Schroder AS Commodity.

I held them for three years and earned about 30 per cent returns. I liquidated them about three months ago.

Q: What was your worst investment?

A: Around December last year, I set up a long-term trade by longing EUR/USD with 500-pip stop loss and 1,000-pip take profit.

My 500-pip stop loss was triggered and the trend reversed shortly, causing me to lose 40 per cent of the money invested for that trade.

I learned from this trade that anything is possible in forex and became even more determined to trade profitably in the volatile market.

Q: What is your investment strategy?

A: For stocks and unit trusts, you need to look more at the fundamentals and prospects for growth. For commodities and forex, technical analysis would be what I rely on.

Fundamental analysis plays an important role, but we must understand that the market is irrational and is often manipulated by big players.

This is where technical analysis comes in, where the trend is my best friend, while I will let my profits run and cut my losses.

Many investors I have seen like to use sophisticated indicators to convince themselves before executing their trades, but I believe that simplicity is the ultimate sophistication and I prefer doing naked trading while observing the price action.

Having said that, sometimes gut feeling works better than any method.

For example, my personal way of detecting a bubble is when aunties in hawker centres start speculating about investing in a certain financial instrument.

Q: What are your plans after graduation?

A: I want to work in a bulge-bracket investment firm in the sales and trading team.

My dream is to be able to make quick and sharp decisions as a top-notch trader when news unfolds on the computer screen.

I am also looking at the possibility of working in Hong Kong, which also has a robust financial sector.

Q: What advice do you have for other young investors?

A: You need to trade what you see and not what you think. It is important to be objective and not emotional.

You need to buy when there is maximum pessimism - like during the 2008 crisis, when Lehman fell - and sell when there is maximum optimism.

Most people are emotional, but you need to put your emotions aside when trading. I feel that the buy- and-hold strategy is dead as market plunges become more common nowadays.

If you're between 17 and 30 and have an investing story to share, write to btyif@sph.com.sg with 'Starting Young' in the subject heading

[greypiggi]

Actually i kind of agree...even though i am now trying out a buy and hold strategy for my core portfolio. Past 4 years i have been doing speculative trades based on technicals coupled with some fundamental as the basis for selection. I buy down the pyramid. Amazingly, I have done about 16% pa returns inclusive dividends less all comms. I trade mainly on SG and US counters. About 25 trades or so per year and hold about 8-15 counters anyone time. If i compare with someone who bought and held over the same from 2007-2010 ... i think i probably did much better. STI hardly moved....

Not bragging. I think the returns were commensurate with volatility. During 2009 crash, my portfolio dropped close to 50%. Avg portfolio size was 200K per annum growing from 120K to 350K by end 2010. I added from my salary. I close out my account each year and count only realized gains and dividends.

Now i came into a lot more money. So i cannot stomach the volatility so am trying out buy and hold strategy while still keeping about 500K or so for the old way of trading.

[Musicwhiz]

Amazingly, I have done about 16% pa returns inclusive dividends less all comms. I trade mainly on SG and US counters. About 25 trades or so per year and hold about 8-15 counters anyone time. If i compare with someone who bought and held over the same from 2007-2010 ... i think i probably did much better. STI hardly moved....

Not bragging. I think the returns were commensurate with volatility.

That's a very impressive result - 16% per annum for about 4 years in a row. And that's achieved with a combination of speculative trades and fundamental investing? But can the same strategy be used to ensure the returns stay so high for future years?

I don't think it's about bragging. More likely I would ask if the returns were achieved without taking up undue risk? Volatility would not affect returns unless the bets were speculative and significant enough to affect your overall returns. The problem with such a strategy is that if used too often the "risk" portion may become too large to stomach, and future returns inevitably may get severely eroded.

Just my 2-cents.

[greypiggi]

You are right in that the risk I took accounts for the returns i got. Like I said, portfolio dropped more than 50% during the pits in early 2009!

How I select counters is based on fundamentals. Meaning a growing company trading at below historical PE. Could be due to one off company event, general market sinking etc.

Then I watch the counter to get a sense of trading volumes, near term high and lows. Then I start to nibble. Usually $10K buy. If it goes up, i sell when it hits above 20% profit after letting it ride. If it falls, i double down at 80% of initial purchase price. If it falls, further, I double down even more. This is why i do the fundamentals to make sure the firm itself is fine. I allow myself to own up to $50K,75K or 100K of a counter.

This is how I did the 16% returns from 07-10. But for this year, it has not worked too well. Down about 4% on my core portfolio (mainly blue chips and dividend yielding stocks) and down 13% on my speculative one.

[Bibi]

I use the same strategy as you, the pyramid down approach. But I still believe this will work ultra well only during recession. At one point my entire portfolio is down 40%. I do calculations to pyramid such that my portfolio won't fall below 50%. Despite this, the dividends from my portfolio is expected to give me a sustainable 7.5%.

[mrEngineer]

Sorry but I cant seem to find on a quick search on pyramid down approach. Do you mean you buy more at the start and lesser as it goes down?

[Temperament]

I have been doing pyramid down(average value down) since day one. My version is buying 1,2,3,4..actually is trying to catch the falling knife. From reading many investment books, not one author favors this value average down. They all favors value average up(pyramid up). Why? That's buying 4,3,2,1,.. i am now trying to practise this method. It's like trying to catch the "flying-up-knife" instead of the falling knife which is much more dangerous.
It's definitely safer. i admit i have yet to put into practice. It's also because of this new mindset i did not average down any stock during this mini downtrend. Why? Because my " gut-feel" the "falling knife" has not really fall low enough for me to start pyramid up.

[Musicwhiz]

Business Times - 07 Nov 2011

STARTING YOUNG
Experience yields internship

Guan Wenyi, Marc Song win Citi Foreign Exchange Challenge. By Dolly Chia

AMONG the 600 young investors who entered the Citi Foreign Exchange Challenge this year, it was the team of Guan Wenyi and Marc Song Jia Shun that emerged victorious.

The 23-year-old buddies entered the challenge to pit themselves against 299 teams in a bid for an internship with Citibank.

For Wenyi, the competition gave him more exposure to foreign exchange while Marc is seasoned in forex investments. The latter has always been interested in forex and entering the competition was a natural progression.

To date, both have taken part in five competitions together.

Marc started investing when he was 19 years old with $5,000 in his forex account. Although he lost everything in his first attempt at forex, he re-opened his account after he accumulated another $5,000 from his National Service salary and has since grown his account to a six-digit sum.

Wenyi started two years ago in equities. He now invests in forex and contracts for difference (CFD) on the Standard & Poor's index.

Q: Did both of you experience any conflict when making decisions during the competition?

Wenyi: Our friendship has actually made it easier for us to work together. We both share the same interest and I think we complement each other very well. Our characters are very similar and we discuss strategies beforehand so I thought we're actually a good fit. There was no conflict during the competition at all.

Marc: We have taken part in five competitions together. This is the most interesting for me because I am very familiar and confident with forex.

Q: How did you start investing?

Wenyi: I started investing when I turned 21 but didn't do well as I didn't understand the market mechanics then. My investments were mostly in US equities with small caps back then.

I learned much more about investor psychology, risk management and money management techniques along the way as well as the global macro economic environment.

Marc: I actually lost my full account during my first try. I learned my lesson. I think you shouldn't trust everything you read. Don't take too much risk. You won't really know until you feel the actual pain of losing money. I then came back with another account and so far I've been profiting and I've covered my losses with profits.

Q: What are your current investments?

Wenyi: I currently invest in forex and contracts for difference on indices mostly in the US. As mentioned, I think when we were new to this field, we didn't really understand the reason for losses so there have been some losses. But over time with forex and CFDs, I have been doing rather well, with about 15 per cent returns this year. Over time, you get the feel of the market so you read a bit more and understand more. The most important thing in investing is risk management, learning from lessons and ensuring we're not too greedy.

Marc: I trade forex almost every day. I started off as more of an intra-day trader but when school started, I shifted to mid to long-term positions.

Q: What did you learn from the competition?

Wenyi: I've learnt about teamwork, and working together with Marc has been going well. I've definitely gained more experience about the forex market. In terms of winning, it shows that we have teamwork and we are able to apply everything we've learnt.

Marc: I agree with Wenyi. After all, we've been trading so much so it's good to know that whatever we've learnt has come to some meaning. Our characters complement each other. During our CCA , when both of us are in the market and we would share opinions with each other and discuss strategies. We discuss but we don't really invest together because we have our own opinions. I believe that in this market you need to have your own opinions on where the market is going but it's good to hear people's ideas and it's good to exchange ideas.

Q: What is your risk appetite?

Wenyi: For me, it's more about capital preservation because it doesn't make sense to have an excessively high leverage where the portfolio could be wiped out by one wrong decision. What I usually do is trade with only a portion of the account and not the full amount. I will take a small to medium sized trade which will enable me to focus my thoughts better. When there is excessive leverage, my mind is not able to execute judgements in the most appropriate manner.

Marc: Actually my risk appetite has changed throughout the period. When I started out, I have to admit that I was high risk but the rationale was because I started with $5,000. Let's say you want to generate 20 per cent, it will probably take you one whole year of effort to generate about 10 per cent so it's about $1,000.

As I grew my account, I have toned down my risk relatively. Last year, my returns were relatively less but I calculated my Sharpe ratio because I was monitoring. I have a better Sharpe ratio of 1.7 approximately. As I grew my portfolio, my risk appetite has toned down. As I said, I moved from high frequency trading to a relatively longer-term position-taking.

I started believing in George Soros's way of doing things. He's famous for currency but he also talks about equity index, and how global macroeconomy reflects activity. When I didn't have money, I did forex and after I've gotten returns, I started venturing into equity indexes.

dchia@sph.com.sg

If you're between 17 and 30 and have an investing story to share, write to btyif@sph.com.sg with 'Starting Young' in the subject heading.