Me & My Money: Risk-taker plays waiting game

When it comes to investing, Mr Ernest Low, 45, is aggressive. As a risk-taker, he adopts the same approach to his career path.

He left a stable job in the civil service, which he had taken out of necessity after graduating, to join a start-up in finance, even though it derailed his financial plans for seven years.

He said: "I had no savings in that period, and was drawing down on my savings or dividends from previous investments.

"It was where I learnt more about investments, and I grew up in the time there. It was a great experience because in a small company, there are not many employees and your role becomes bigger."

Mr Low then joined AXA Life Singapore as head of investment and wealth management, and is now in the process of rebuilding his wealth. Even though the father of two children aged 13 and 16 has to protect his capital, Mr Low remains "pretty aggressive by nature", investing in mainly equity unit trusts with a focus on emerging markets.

He is able to do so after weathering storms such as the Asian financial crisis and the Sept 11 attacks.

He said: "You have to learn from financial history. A big crash happens about every three to seven years. When that crash happens, it's good to look at opportunities.

"I bought my first unit trust at the worst possible time, but markets do trend upwards over the long term, and I still made a 4 to 5 per cent annualised return.

"If I had panicked and sold, I'd have realised my losses."

In recent years, he has invested in global emerging markets and remains optimistic over the medium to long term.

Mr Low said: "They've been beaten down after the financial crisis and have lost about 60 to 80 per cent. In the last four years, those markets have not done well, but there will be a point of recovery.

"This year, Brazil is going through a recession, but the stock market is up 30 to 40 per cent because former president Dilma Rousseff was impeached. Michel Temer, the new President who took over, could be pro-business, so investors have started to return."

He noted that most markets have a turnaround story, and the question is when it will happen, which is why "it's good to go into the markets early before it gets too pricey".

Q Moneywise, what were your growing-up years like?

A I came from a middle-income family, and did not have to scrimp. My father worked in a bank and my mum was a housewife.

I have an elder brother.

When I first started working, I took on a government job.

For graduates, you would start with about $1,000 plus, and I was getting married in a few years' time.

I was saving $500 a month for my wedding, and also giving money to my parents.

It came to a point where I would buy a loaf of bread for a week, and for lunch I would spread peanut butter on bread and eat in the office.

It went on for a few weeks before I realised I was going overboard.

Q How did you get interested in investing?

A My first investment was in unit trusts through an investment-linked plan, just before the Asian financial crisis in 1997. This was in an Asian balanced fund with stocks and bonds, and the fund crashed about 50 per cent.

Today, it has an annualised return of 3 to 4 per cent a year.

It has gone through events such as Sars and the tech bubble burst.

I invested in the worst possible period, and that was one of my first learning experiences.

I started to dabble in stocks in 2000 and would read The Straits Times' stocks page. I studied the price-earnings ratios and shortlisted stocks, looking at their annual reports. I set a price target of earning over 15 per cent whenever possible.

On Sept 10, 2001, I sold two stocks because I made more than 10 per cent each, and the Sept 11 attacks occurred. I did not foresee something like that.

A few days later, I invested in some stocks as the markets were down significantly. I learnt that markets will go up and down, but over time they trend upwards.

I have since increased my target earnings to more than 50 to 100 per cent, which may take years to reap.

Q Describe your investing strategy.

A I tend to go for value or things that have fallen out of favour.

I seek opportunities whenever the markets are down, and if I see a potential for rebound. I also believe in diversification.

I may like a certain set of stocks, but I will not put all my money into only one or two stocks or unit trusts. No matter how good you think they are, the unexpected can happen.

Usually you don't lose everything in unit trusts, but the loss can be more than 50 per cent.

Once, during tensions between India and Pakistan, I put a bit of money into Indian stocks through a unit trust. It turned out to be a good call as I made 100 per cent, but I sold it too early because it eventually made 200 per cent. You will never know the highest point.

You may go for things that are of good value, but remember it can stay low for quite some time, so there is a need for patience.

For stocks, I look at the price-earnings ratio first, usually a ratio of 12 and below, but you have to study the markets and industries to understand why the ratio is low.

Sometimes, there are good reasons why the stock has a low price-earnings ratio and should be avoided.

In the last five years, I have been moving more into unit trusts as I do not have enough time to monitor my stock holdings.

I have been putting more money into one fund - the Fullerton Dynamic Strategies Fund.

Three years ago, I was working with Fullerton to set up a fund strategy for my previous firm.

We wanted to create a flexible asset allocation where we can see which markets are doing well and go into them. Fullerton manages the fund, but I have regular meetings with them to get updates and bounce ideas off them.

Not to put down Singapore-based exchange-traded funds (ETFs), but they are not well traded here at the moment. United States ETFs make more sense, but there is the estate duties issue. If the investment size is large enough, it may attract significant estate duties from the US upon one's death.

Q What's in your portfolio?

A Mainly local stocks such as Frasers Commercial Trust, Keppel Corporation and Olam. Two-thirds of my portfolio is in unit trusts.

I hold about $5,000 to $10,000 in each stock I invest in.

I started to buy into the Frasers trust in 2009, after Frasers Centrepoint took over Allco Commercial Reit (real estate investment trust). After the global financial crisis, there were fears it would not be able to refinance its debt.

I inched into it from February 2009 to August 2009, at prices ranging from 9.5 to 25 cents.

There was also a stock consolidation of five for one. I took some profit in 2012, but I am still holding two-thirds of my investment in it.

I was looking for beaten-down stocks, and thought there was a good potential for the trust to recover - as Frasers Centrepoint would be able to help in the financing. The value of the trust's properties was worth more than the stock then.

I noticed that from 2011, commodities started to get beaten down, so I invested in names such as Olam and Noble Group.

The stock prices might be hurt but I am willing to wait.

However, it is not easy.

For Olam, Temasek Holdings came in to become a significant stakeholder. I am now in the black, but it is still early days. Noble Group has a significant shareholder, China Investment Corporation.

I hold about $50,000 to $100,000 in unit trusts, which are in funds such as the Fullerton Dynamic Strategies Fund and the Fidelity Emerging Markets Fund.

The major portion is in the Fullerton fund as a core fund, and the others are satellite funds.

The annualised returns for stocks are about 6 to 7 per cent, with all the winners and losers, and the unit trusts' returns are similar.

I wish to achieve 9 to 10 per cent, but after the great financial crisis (in 2008), the existing investments were hit badly. However, it was mitigated by my new investments just after the crisis when markets were severely down.

Q What's the most extravagant thing you have done?

A Travelling. We don't eat out often or spend on other things. A trip to Japan cost about $10,000 for five of us, including my mother-in-law.

We always go for the value-for-money choice, such as choosing apartments over hotel rooms in Australia, and we track sites such as TripAdvisor.

Q What are your immediate investment plans?

A Because of the seven lean years I had, I will probably retire at 62 or 65. Excluding the Central Provident Fund portion, I'm saving at least 30 to 40 per cent of my income. When I get bonuses, 80 to 90 per cent go into savings, and anything more than my emergency funds will be converted into investments. If there are no opportunities, I'll continue to save.

Q How are you planning for retirement?

A The monthly retirement income for my wife and I could be $3,000 to $4,000, and maybe we can leave some form of legacy for our children, but they should not count on it too much.

Q Home is now...

A A Housing Board executive apartment in Woodlands.

Q I drive...

A My wife, who is a pharmaceutical sales representative, drives the Honda Fit Shuttle most of the time.

This article was first published on October 02, 2016.
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