From crises, lessons on diversification
Endowus Insights

From crises, lessons on diversification

Updated
June 7, 2022
published
April 1, 2022
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It began in the summer of 1997 — the year the ground shifted under Ken’s feet.

Ken’s family had much of their savings tied up in a handful of stocks. The Asian Financial Crisis that rocked markets in this part of the world upended the family’s financial situation.

“My first memory about investing, to be honest, wasn't necessarily all positive,” says Ken.

The family decided to stay invested in those few stocks until the markets recovered. But with most of the liquidity locked up in the stock market, the family budget for day-to-day expenses dramatically changed.

The allowance that most teenagers would expect from their family dried up. To put himself through university, Ken did part-time and summer jobs. 

“As a teenager, I was pretty frugal. I didn't really buy that much stuff because I looked at how hard my mom and dad worked,” says Ken.

Both his father, an accountant, and his mum, a fashion designer turned homemaker, were also active about their budgeting ways. So he was shaped too by them making practical lifestyle choices. 

And that first crisis-tainted memory forever changed the way he looked at investments. Now in his 40s, the venture capitalist is clear that his portfolios should always be balanced and diversified. 

“At the end of the day, you can't just be investing 100% in stocks and be managing your own portfolio,” he says. 

“I think it's about asset diversification: having some real estate, having some stocks, having a balanced portfolio of bonds and stocks and also, potentially having somebody professionally manage it.”

Ken started investing his money after accumulating his savings. 

But that began in 2007. 

And in 2008, Ken got another front-row seat to the unfolding of the Global Financial Crisis. As Lehman Brothers fell to its knees in September 2008, the junior associate at the investment banking division watched his stock options at Lehman Brothers evaporate to nothing. 

“One thing that came out of the Global Financial Crisis was attention to hidden costs. Over time, the returns for these investment-linked products didn't really pan out, which forced me to think about investing my own money.”

“To see that actually go down to zero was quite a difficult period of time,” Ken recalls.

He would also recall that investing right before the crisis was “probably not the right point in time” to go in. 

“The lesson learned, I guess, is that it's hard to time the markets,” he says. 

“So again, I think anything in life, I feel, is a hedge. While I invested in some bank stocks right before the Global  Financial Crisis, I also managed to pick up some winners as well. It wasn't all negative for me. During that time, I managed to also learn how to invest better.”

“I think one thing you have to figure out yourself is, what type of investor are you? Are you more of a speculative investor, where you are in it just for the short-term gains, or are you looking to build longer-term wealth?

His personal investment experience has been one of trial and error. Early in his investing journey, he would buy multiple investment-linked products. Then he realised there were hefty costs hidden from plain sight. 

“One thing that came out of the Global Financial Crisis was attention to hidden costs. Over time, the returns for these investment-linked products didn't really pan out, which forced me to think about investing my own money.”

So he poured his time into a lot of reading of research reports and books, to stay clued into the market. 

“I think one thing you have to figure out yourself is, what type of investor are you? Are you more of a speculative investor, where you are in it just for the short-term gains, or are you looking to build longer-term wealth? Then it's all about taking longer-term conviction calls,” says Ken.

Ken worked as an investment banker across Hong Kong, New York, and Singapore for 12 years, then started his own company in 2016, before becoming the venture capitalist that he is today. 

And as the days turn to years, Ken has come to terms with his investment philosophy.

He knows he cannot be monitoring the markets to extract short-term gains. It is better to turn that responsibility over to professional financial managers who can access funds that give him a diversified portfolio.

“One thing I realise about myself is that I'm probably much more of a longer-term investor because I just simply don't have the time,” he adds. 

“I sleep a lot better at night knowing that there are money managers who are managing my money at a fraction of the cost of what I would normally need to pay to get access to them.” 

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