00:05 Even experts get it wrong
01:33 Why is stock picking so hard to get right?
03:17 Cost is your biggest enemy
05:21 Should you invest a lump sum or use dollar-cost averaging?
06:22 Why is Endowus here to stay?
Even experts get it wrong
Sam: When I was a professional investor and doing it full time, I may be able to buy low and sell high. In my 28-year career, I would outperform the markets for five years or seven years. That was when I had a really good run. But most of the times, and for most investors, even professional investors, they mostly underperformed the benchmark.
It's very difficult to beat the benchmark and there's many reasons for it. One reason was that we cannot time the market very well. It's because we are human beings and when we say that “I'm going to time the market”, it means that “I'm going to predict the future”. So when it comes to anything else, we say — we humans, of course, cannot predict the future. We don't know what the future holds. But when it comes to investing, we say that we can forecast the future, we know what's going to happen in the future. It's impossible. How can we do that? We're human beings, right? So, we have to be humble.
Even a professional investor like me who has done 28 years of investing and outperformed a lot, I try to be humble because I know all the mistakes I've made and all the times I got things wrong. So if you're not a professional investor, chances of you outperforming is very low.
Why is stock picking so hard to get right?
Stock picking is very difficult. Even for professional investors, it's very difficult to get it right. There’s always going to be a stock you pick that makes you money, and there's always going to be stocks that you pick, that's going to lose you money. In the end, you just hope that as a whole, you make money. But as I said, it's very difficult to do.
People often don't look at the entire portfolio objectively. They often think that if I picked a stock which made me money, stock picking wins. If they invest in a stock and it crashes, they would say stock picking doesn’t work. But that's not the way we should look at it. It should always be based on probability. We should always look at the big picture of the portfolio asset allocation to understand exactly how those returns are driven or generated. Stock picking for retail investors would not work unless you know the company inside out.
For instance, if you work for the company or you're a user of their product and you believe in it, you invest in the company’s stock and you hold it for the long term, then maybe that's okay. But for the general retail investors, I think stock picking is a very difficult thing to do. Generally, it is right to say that in order to generate high returns, you take high risk. If you take low risk, you get a low return. It is correlated.
But when you stock pick, don’t diversify and don’t have asset allocation in your portfolio, you take high risk and low or negative return. These are things that 100 years of investing has taught us. As human beings, we need to learn from our past.
Cost is your biggest enemy
We were the first to have a digital experience for CPF investing. We have a mobile app and a website where you can open an account with Endowus or open a CPF Investment Scheme account and start investing. These are things we couldn't do before.
Secondly, it used to be very expensive to invest and S&P 500 was not available for investing through CPF. Hence we made S&P 500 investable for CPF monies. Because we were the only ones that wanted to do it, we were the only ones that you could invest through.
We were keen to get S&P 500 passive index funds global indexes into CPF because we believe it's the best way to invest. Passive investing, around the world, is one of the best ways to invest long term and grow your wealth, but there was none available for CPF.
So we worked with our partners Lion Global, Vanguard, Amundi and coming soon we have Blackrock bringing their products in as well. The Amundi funds that we are bringing into CPF are the lowest cost funds ever in existence in Singapore. That's how we solve the problem of not having these things available for investment through CPF.
Lastly, there's a lot of cost embedded when the fund is distributed in Singapore. It is very costly to buy through platforms like DBS or Fundsupermart. Hence, we wanted to make it a digital experience since online means that it's a better experience and it's lower cost. It's all about lowering costs for everybody because when you invest, cost is your biggest enemy. If you can reduce costs for the same fund, obviously you're going to have better returns.
So that's what this is all about. Better experience with lower costs for individuals. We are always fighting for the individual to have better solutions.
Should you invest a lump sum or use dollar-cost averaging?
It’s an important question. If you do a long-term study, lump sum is always better because it compounds better. But it is very difficult as an individual to put all your money at once. It's psychologically difficult and behaviourally we stress about it, so we try to make it easier by dollar-cost averaging or make monthly savings plans. If you have a lump sum, you can split it out into three blocks or four blocks and invest over weeks or months or even quarters.
Split them into something that you are comfortable with because investing is a very personal experience. No one is your age with your experience with your money. People have different goals in life.
Why Endowus is here to stay?
The way we build the company is very different — the culture, the company structure, fundraising and our investors. If you look at our capitalisation table — ownership of the company, we have the founders and all of the employees actually own a piece of the company.
Secondly, our biggest investors include the Economic Development Board’s global investment arm (EDBI). Other investors include UBS, the biggest private bank in the world. We are their first investment in the fintech space and first investment in a wealth management company in Asia Pacific. They vetted us and conducted their due diligence by studying us for over a year to invest that money.
Other big names are Singtel, a homegrown champion, Samsung, and others such as Lightspeed (Venture Partners) and SoftBank Ventures, two of the biggest global venture investors, and Z Holdings. Prosus Naspers, the largest shareholder of Tencent, is also an investor. We are very diversified with big names who have deep pockets, and they will support us to grow into the company we want to be.
Lastly, if anything happens to us, your money is safe. We're the only ones that have been approved by the government to manage CPF money and that makes us very different.
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