7 Money Secrets from ex-editor of The Business Times, Mano Sabnani

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Editor of the Business Times. Managing Editor of The Straits Times. Managing Director for Investments and Equity Capital Markets at DBS. CEO of Today

That’s an illustrious career!

While you thought he would be someone prominent, he is pretty much the opposite, preferring to shy away from the public eye. While shying from prominence, he does do a lot of work in the background, constantly fighting for the minority shareholders, and, at times, to his own detriment.

I first met Mano Sabnani in one of the AGMs of an SGX-listed company. And I had mixed feelings the first time I heard him take the mic.

While I was thankful that he spoke to what the shareholders felt, his sarcastic approach to resolving this issue went against the non-conflicting approach Singaporeans tend to have since we are mostly docile and more submissive in the face of authority.

Indeed, his sarcastic approach antagonized the management of Stamford Land and inviting a lawsuit that followed. Luckily they settled out of court.

Mano wrote Money Secrets to share his extensive wisdom on wealth building and preservation. Written for the Singaporeans on the street, I thought it was very suitable for our readers and I could share some lessons I gathered from the book.

#1 – Wage earners die die must invest

“If wage earners don’t work on their retirement plans from a young age, they will end up as slaves to MNCs in a globalised world.”

I totally agree.
Perhaps I saw the light earlier than my peers as I began to be interested in making my money work for me since I started studying during my university days. I knew one day I would have to retire. And I couldn’t be working forever, right?

The worst feeling is to work in a job you hate but you can’t get out because you needed the salary. Days would feel like years and life would be miserable, maybe even meaningless. I didn’t want to be at the mercy of a job so I decided to take things in my own hands and I valued gaining and developing the skills to invest which would continue to pay off throughout my lifetime.

#2 – Investing is the opposite of Gambling

Investing is based on decisions made on a sound, logical assessment of probabilities whereas gambling involves wild swings at the game of chance. In other words, a proper investor puts money down when he logically believes the probabilities or odds are in his favour; a gambler puts money down without caring whether the odds are in his favour and just hopes it is his lucky day.

It is easy to relate investing to gambling simply because most people lose money in both of them. There’s a tendency to blame external factors rather than to blame ourselves when things don’t go our way (attribution bias). We will conveniently blame that the markets are rigged just like the casinos have an edge over the gamblers – that’s why we lose.

No!

Don’t be a sore loser.

The truth is that certain strategies have been proven by peer-reviewed academic research (the gold standard of any research!) to possess an edge over the rest of the strategies employed by the market. And using these strategies allow for higher returns.

This led me to develop a preference for Factor-Based Investing because it is grounded in scientific proof and research-backed evidence. For example, researchers armed with Phds and Nobel Prizes have proved that buying low price-to-book stocks delivers higher returns in the long run so we can make use of their findings in our investment strategies to better our chances.

Hence, the stock market is a casino only if you do not know what you are doing.

#3 – It is easier to succeed as an investor than a trader

It is possible to succeed as an investor or trader, but I believe it is much better to be an investor.

This has always been a contentious point – investing vs trading. Investing is usually defined as having a long-term horizon while using fundamental analysis as a core investing approach. Trading on the other hand often refers to short-term, higher frequency of entries and exits from the markets.

Traders rely mainly on technical analysis or chart reading to make their decisions.

Having been on both sides of the spectrum, I can tell you that my experience and results showed that it is easier to be an investor than a trader. I have achieved far better results as an investor. 

I have also observed more successful investors than traders in my past decade of interaction with market participants. Successful investors probably outnumbered the successful traders 5:1. Maybe I have a biased sample but it doesn’t stop you from observing your circle and verifying if this is accurate.

#4 – Stop ‘playing’ shares

It is very common in Singapore to hear people use the expression “play shares”. It sounds fun and exciting, but reveals a very insidious attitude towards the stock market: that shares are something to be toyed with, frivolously, like punting at the casino, rather than carefully studied, analysed and approached in a measured manner. Please do not say “play shares”. Say “invest in shares”.

Relating to #2 (investing is not gambling), investors should stop using words like ‘play shares’. It sets the wrong mental model – that investing in shares is a casual endeavor and not a serious one.

That attitude is what gets gamblers into trouble – treating stock investing like buying a low effort, low probability but high return lottery ticket which often ends up in disappointment.

Change the choice of words and you might become more committed to your investment process.

Maybe you will start tracking your returns and refining your investment strategies. Maybe you will reflect more often and observe your investment behaviour and mistakes. Eventually all these would lead to an improvement in your investment results.

#5 – Stop thinking you can sell everything before a stock market crash

If the market becomes very overvalued by objective measures – for instance, price to book, forward price-to-earnings ratios (PE), or PE compared to growth – then it is alright to take plenty of profit and keep up to 50 percent cash. But I would not sell everything. If you do so, you might hesitate to get back into some businesses with great long-term prospects – especially if the stock continues rising – and you might miss out on some astounding long-term growth stories.

Mano said he would not sell every stock he owns and would likely have some stocks in his portfolio even during a stock market crash. I know this doesn’t bode well with most investors because the losses are huge and the fear of loss is tremendous. It is common sense to just get out!

But the problem is how do we know for sure a crash is coming? A crash is only a crash when it is obvious. And it is obviously too late by then. So I cringed every time someone said ‘I will sell before a crash’. How do you know? This is overconfidence in disguise. We only know that most predictions do not come true. The price of timing crashes is that you get it wrong and suffer lower returns. I have heard people called for a crash since 8 years ago – they would have been richer staying invested in stocks than to be overly worried about losing.

#6 – Too much REITs can be a bad thing

In my opinion, it would be sensible to ensure that your investment in REITs does not make up too large a portion of your overall portfolio of value stocks that have growth potential and pay decent dividends. Percentages can vary, but for me, as an illustration, REITs do not constitute more than 20 per cent of my overall portfolio by value. I also do not own any physical property other than the family home jointly owned with my spouse. If, however, you wish to build a portfolio that contains more than 50 percent in REITs, do make sure that you have sufficient diversification in terms of the number of REITs, the sponsors behind them, the types of properties they hold (for instance retail, industrial and hospitality) and the geographies in which their assets are located (at least three different countries); and that you set aside sufficient cash (commensurate to the value of your REIT holdings) to get a good deal for yourself during cash calls.

To say “Asians love properties” is an understatement.

I don’t know what’s the driver for this desire to invest in real estate.

Nowadays, properties are capital intensive and hence prices majority of the investors out of the market.

The invention of Real Estate Investment Trusts (REITs) is a blessing for small-time investors as since they can now own a fraction of the properties with minimum capital, and still be able to ride on the growing value of the property.

REITs have gained popularity over the years because they are simple to understand – invest in properties and they give out generous dividends akin to receiving rent payments.

I wouldn’t be surprised that investors have a large proportion of their capital in REITs.

Like anything in this world – too much of anything isn’t good.

I fear that the good performance of REITs in the past decade has led investors to have unrealistic expectations of its future.

REIT investors might think it is rosy going forward only to find out that it might not be.

Investors should play defensively because we do not know a lot of things. While REITs are good investments, one should still diversify into other industries and asset classes. Better to be safe than sorry.

#7 – Entrepreneurship is harder than investing

Which road you take, investment or entrepreneurship turns on your situation in early adulthood. It depends on your family background, financial situation, education level and, most importantly, your own attitude to work and life. Quite often, but not always, entrepreneurship is born out of necessity. My own observation is that young people who are less strong in academic studies or who do not have a chance to go for higher education will opt to do a business of some sort. They may enter the workforce at an early age and learn some skill or business while earning a modest salary. After a few years on a steep learning curve, they move out on their own to start a small business in their area of knowledge. Often, while at work, they discover their strengths in terms of skills and attributes. These are put to good use in building the business to e

arn a living. But it is very tough going, at least in the initial stages.

Some people might be thinking between becoming an entrepreneur or an investor. I agree with Mano’s observation that the entrepreneurs who have lower academic qualifications have less to lose in terms of a rewarding career and hence, are more willing to become entrepreneurs. I also agree that entrepreneurship is tough in terms of the effort as well as the low success rate.

However, I do not agree that you should compare entrepreneurship with investors.

I believe that entrepreneurship versus employment is a fairer comparison.

This is because being an entrepreneur or an employee is a full-time endeavour and one can have the power to effect changes to a certain extent.

However, an investor is a price taker and has little power to change the way businesses are run. Also, the investor requires capital which is usually derived from the success in a business or a career. 

My belief is that entrepreneurship provides more upside but with a higher chance of failure while a career offers the opposite – less upside but low failure rates. It’s indeed a choice. But either one can be an investor eventually.

Closing Thoughts

These are the 7 money secrets which I thought are worthy to share with you. You should read the book as you may get other nuggets of wisdom which I might have missed. Which points resonated with you? Share your story and comment below!

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