Ntu 2010 Presentation (Tnfm)

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  • 1. Practical Investing
  • 2. Investing to make a billion!
  • 3. Investing to make a billion!
    • Warren E. Buffett
    • US$1,000 invested with Buffett in 1956 was worth about US$30.6 million at the end of 2007!
    • ~28% compounded annually versus 10.4% for S&P 500
    • 2 nd richest person on Forbes 2009 list (US$37 billion net worth)
    • Epitomised “value investing”, also bought “great” businesses with “wide moats”
    • Favourite holding period - “forever”
  • 4. Investing to make a billion!
  • 5. Investing to make a billion!
    • George Soros
    • “ Man who broke the Bank of England”
    • US$1,000 invested with Soros in 1969 was worth about US$2.15 million at the end of 1995!
    • ~34% compounded annually versus 11.7% for S&P 500
    • In 1992, made US$1.8 billion by shorting British Pound and buying German marks
    • 29th richest person on Forbes 2009 list (US$13 billion net worth)
    • Epitomised “betting the farm”, willingness to place huge bets in employing a global macro strategy
    • “ We start with the assumption that the stock market is always wrong ”
  • 6. Investing to make a billion!
  • 7. Investing to make a billion!
    • John Paulson
    • President of Paulson & Co hedge fund
    • Made US$20 billion for his firm in the recent crisis
    • Credit Opportunities Fund rose 589.6% in 2007
    • Bet against US housing market, financial stocks
    • Net worth approximated at US$6.8 billion
  • 8. Investing to make a billion!
    • Many ways to invest successfully
    • Not one single “magic formula”
    • Successful managers had a “game plan”, but adapted it to changing conditions
    • At the end of the day, the investment returns speak of success or failure
    • Also an “art”, rather than merely a “science”
  • 9. Formulate Your “Game Plan”
    • You need to decide your own investment strategy
    • Continually review and revamp the strategy if necessary
    • Mistakes are common, but are often the best learning opportunities
  • 10. Agenda
    • Equities Investing – Not as easy as it seems
    • The investment universe
    • Introduction to unit trust
    • FSM approach to construction of portfolios
    • Questions & Answers
  • 11. Equities Investing
    • Benjamin Graham (Security Analysis, Intelligent Investor)
    • Two Rules of Investing
      • Don’t lose money
      • Don’t forget rule 1
    • Philip A. Fisher (Common Stocks and Uncommon Profits)
    • - 15 Points to look for in a common stock
    • - Scuttlebutt
    • John Burr Williams (The Theory of Investment Value)
      • Dividend discount model
  • 12. Equities Investing – Can do
    • Quantitative analysis
      • Ratios analysis: P/E, Du-Pont, P/B etc
      • Deriving intrinsic value : DDM and others
  • 13. Equities Investing – Harder to Do
    • Qualitative Analysis "Fifteen Points to Look for in a Common Stock"
      • Does the company have a worthwhile profit margin?
      • What is the company doing to maintain or improve profit margins?
      • Does the company have outstanding labor and personnel relations?
    • Scuttlebutt – Networking Technique
      • Most people love to talk about their competitors. Go to key managers in five different companies in an industry and ask each of them questions about the other four. You will emerge with a detailed and accurate picture of all five companies
      • Other sources include vendors, customers, professors, trade association executives, former target company employees, and so on.
  • 14. Why Stock Analysis is so difficult Fibrechem Technologies This was one of the best-followed S-chips. The first sign of trouble surfaced when the China-based chemical fibre-maker requested a trading halt on Feb 23 this year. That was the day it failed to release, as scheduled, its fourth-quarter and full-year results. To the dismay of shareholders, the firm's auditors indicated they had difficulty finalising the audit on its trade receivables and cash balances as of the end of December last year. Before the trading halt was imposed, the counter plunged seven cents, or 40 per cent, to 10.5 cents, with 9.68 million shares traded. Meanwhile, founder and chief executive James Zhang resigned from his position as executive chairman. The company has appointed NTan Corporate Advisory as its independent investigator to examine the questionable transactions. No progress has been announced. “ S-chipped”- Tue, Mar 31, 2009 The Straits Times
  • 15. Even if you are good at picking stocks Straits Times Index Components % Change in 2008 SMRT Corp Ltd 0.0% ComfortDelgro Corp Ltd -17.1% Singapore Press Holdings Ltd -28.2% StarHub Ltd -31.2% Jardine Matheson Holdings Ltd -32.5% Singapore Technologies Engineering Ltd -33.8% Jardine Strategic Holdings Ltd -33.9% Singapore Airlines Ltd -34.2% Genting Singapore PLC -34.3% United Overseas Bank Ltd -34.5% Singapore Government Bonds 7.40%
  • 16. Bond Funds in 2008 Source: iFast Financial Compilations; performance in the tables are in SGD terms, calculated using bid-to-bid prices, with any income or dividend reinvested Table 1: Top 10 Funds in 2008 Fund Name Performance Region/Asset Class UOB United Global Bond SGD 8.90% Global Fixed Income Henderson Global Bond Fund 8.50% Global Fixed Income Legg Mason Global Bond Trust 4.70% Global Fixed Income PIMCO Total Return Bond USD 3.50% US Centric Fixed Income LionGlobal Spore Fixed Inc-A 2.20% Singapore Fixed Income PRU Protected Global Titans Fund 2.10% Global Protected LionGlobal SGD Money Market 1.60% Singapore Money Market Phillip Money Market 1.40% Singapore Money Market DWS Lion Bond Cl A 1.40% Singapore Fixed Income Cash Fund 1.20% Singapore Money Market
  • 17. The Investment Universe Your Universe Where can I place my money in? SG Stocks Small Caps Mid Caps Blue Chips Penny Stocks Cash Savings Account Structured Deposits Fixed Deposits Fixed Income Corporate Inflation-linked Bond Sovereign Bond Assets-backed Bond Derivatives Forwards Futures Foreign Exchange Options Unit Trust
  • 18. The Universe of Investments is Large
    • Global stocks: Singapore, US, Europe, Australia, Asia ex Japan, Latin America, Eastern Europe, Middle East, North Africa etc…
    • Fixed Income: Developed government bonds, corporate bonds (investment grade and non investment grade), emerging markets, Treasury Inflation Protected Securities, convertibles
    • Commodities: Equities of resource companies or direct holdings through futures.
    • Alternatives: Various hedge fund strategies e.g long/short, currencies etc
  • 19. Types of Unit Trusts Cash Fixed Income Equities Alternatives
    • Money Market Fund
    • SG Bonds
    • Global Bonds
    • Asian Bonds
    • Emerging Markets Bonds
    • High Yield Bonds
    • Investment Grade Corporate Bonds
    • Non-Investment Grade Corporate Bonds
    • Global
    • Regional
    • Single Country
    • Sectors
    • Strategies
    • Currencies
    • Futures
  • 20. Pros & Cons of Unit Trusts
    • Pros
      • Instant diversification
      • Economies of scale
      • Access to otherwise not accessible market
      • Professional management
      • Smaller start up capital required
      • Require less time & effort compared to stock selection
    • Cons
      • Limited control
      • Recurring fees (annual expense ratio)
      • Slightly lower liquidity
  • 21. As good as individual stocks (maybe even better!)
  • 22. The benefits of active management
  • 23. Exposure to “legendary” fund managers
  • 24. Why limit investments to equities?
  • 25. Why limit investments to equities?
  • 26. Common portfolio mistakes
    • Investment concentration by choice
    • Unintentional investment concentration
    • Losing faith and lacking persistency
    • Failure to rebalance
  • 27. FSM portfolio construction
    • Decide your objective and risk profile, which determines the allocation between equities and bonds.
    • Allocation within equities portion and bonds portion of the portfolio
    • Fund selection to gain exposure to determined regions and asset classes
  • 28. Decide objective and risk profile
    • A well diversified portfolio should contain
      • Equities – for seeking returns
      • Bonds – as return stabilizer (can also seek returns)
    • Vary allocation to equities and bonds according to risk (high risk, higher equities allocation)
    • Returns should then be scaled proportionately
    Conservative Moderately Conservative Balanced Moderately Aggressive Aggressive Underweight 100% Bonds 0% Equities 80% Bonds 20% Equities 60% Bonds 40% Equities 40% Bonds 60% Equities 20% Bonds 80% Equities Neutral 90% Bonds 10% Equities 70% Bonds 30% Equities 50% Bonds 50% Equities 30% Bonds 70% Equities 10% Bonds 90% Equities Overweight 80% Bonds 20% Equities 60% Bonds 40% Equities 40% Bonds 60% Equities 20% Bonds 80% Equities 0% Bonds 100% Equities
  • 29. Bonds and equities portfolio
    • Further allocation of bonds and equities to gain access to require asset classes
    Bonds Portfolio Equities Portfolio Singapore / SGD Bias Bond 30.0% US Centric Funds 25.0% Global Bond Funds 20.0% Developed Europe Funds 25.0% Asian Bond Funds 20.0% Japan Funds 5.0% Emerging Market Debt Funds 15.0% Asia ex Japan Funds 15.0% High Yield Bond Funds 15.0% Global Emerging Market Funds 30.0%
  • 30. Fund selection
    • Quantitative performance indicators
      • Performance consistency
      • Performance comparison (against benchmark)
      • Track record
    • Qualitative assessment
      • Management strengths, weaknesses
      • Investment philosophy
      • On-the-ground knowledge, research resources
    • Fees
      • Annual expense ratio
      • Performance fee
      • Front end load
      • Back end load
  • 31. Key Takeaways
    • In practise, doing well in equities investment is not easy for a retail investor
    • Unit Trusts is a viable alternative that captures a larger set of investment universe
    • Create and continuously improve your own investment strategy
  • 32. Disclaimer
    • This presentation is prepared by iFAST and the opinions expressed herein are subjected to change without notice. iFAST and/or its licensed financial adviser representatives may own or have positions in the funds of any of the asset management firms or fund houses mentioned or referred to in the presentation, or any unit trusts or Singapore Government Securities bonds related thereto, and may from time to time add or dispose of, or may be materially interested in any such unit trusts or Singapore Government Securities bonds. This presentation is not to be construed as an offer or solicitation for the subscription, purchase or sale of any funds. Investors may wish to seek advice from a financial adviser before purchasing units of any funds. In the event that an investor chooses not to seek advice from a financial adviser, he/she should consider whether the product in question is suitable for himself/ herself. No investment decision should be taken without first viewing a fund's prospectus. Any advice herein is made without any regard to the specific investment objectives, financial situation and particular needs of any specific person or group of persons. Past performance and any economic and market trends or forecast are not necessarily indicative of the future or likely performance of the funds or the manager. The value of units in any funds, and any income accruing to the units from any funds may fall as well as rise.
    • Please see our website for further information.
  • 33. Questions & Answers