Alvin: Welcome everyone, welcome to the first video interview I am doing on BigFatPurse.com. My guest today is Sam Goh, a young and promising investor, who started Wisdom Capital at the age of 22. He is still studying in SMU by the way. Despite his age, he has already earned numerous accolades, including the “Money Sensible Youth Excellence Award” in 2006. Sam, welcome.
Sam: My pleasure.
Alvin: Would you tell us what this award is about? The “Money Sensible Youth Excellence Award”.
Sam: “Money Sensible Youth Excellence Award” is actually an award that serves to reward and commemorate young investors who have taken the initiatives, or who have taken their first steps in managing their finances prudently. It was held in 2006 through a nationwide competition, across the four polytechnics. I decided to participate in this competition through Temasek Polytechnic and I wrote an essay on how I went about managing my own finances and investments. I went to two or three rounds of interviews and finally, it is a privilege that they have given me this award.
Alvin: I see. So the submission was via the essay, am I right?
Sam: Yes, and I have to go through 3 rounds of interviews.
Alvin: There are interviews as well. I see. So you shared about your personal journey in investing, probably that is how they evaluate among the rest?
Sam: Yes. It is actually a two-prong approach in such a way that not only they evaluate on how you go about managing your investment, they also look at how you go about managing your finances. I think in this aspect, they placed a stronger emphasis on personal finance.
Alvin: What is the age limit? Twenty-three or twenty-four year olds?
Sam: No. It is opened to all polytechnics students.
Alvin: As long as you are in a polytechnic, you are eligible for the competition.
Alvin: On that note, how do you get started in investing in the first place?
Sam: I started investing at the age of 18, through my parents’ and my uncle’s trading accounts. So when I first started trading, I have no knowledge at all. I remember very clearly that I was in polytechnic year two, because I had no sound knowledge of any investment know-how and etc, I started trading through my friend’s recommendations, remisier’s recommendations, as well as my stockbroker’s recommendations. I came to realize that I went into the market without any knowledge, and I remember I traded the very first stock simply based on recommendation without doing any form of homework, or reading up about the company, 0r looking up at the company’s financial statements etc. As a result, the stock plunged two weeks after I was trading on it. This is actually quite a prominent local company. I was trying to find out why this stock actually plunged so much after two to three weeks after I have invested in it and I realized because they had a very big middle-east business operation that was being faulted due to the disagreement with their counterparts. This caused the shares price to plunge. So I learned a very heavy lesson from there, then I realized that I would probably need to build up on my financial education before I move on to the stock market. I spent about six months to master my financial knowledge. I attended as many courses as possible; seminars on technical analysis, fundamental analysis, value investing etc. And I also read up a lot of books. For example, I read books from Warren Buffett, books from George Soros, etc. Within these six months I tried to compress as much as I can. I did a lot of demo trading, simulated trading etc. Thank God six months later I went back to the stock market, I was quite lucky because it was actually on a bull run. I bought some shares and these shares actually doubled. I decided to touch on forex, the same thing happened again. I couldn’t master the art and science of forex trading. I still remember very clearly when I first started out doing forex through Saxo, I traded EUR/USD not knowing how volatile this pair is. Again, I suffered losses; in fact, massive losses. I realized that leveraged product is really a different arena as compared to traditional stocks. Again, I spent some time to read up, spend some time to master the art and science of forex investing. Thank God I was able to, not to say master fully, I don’t think anyone will master hundred percent the art and science of investing, I was quite fortunate to be able to grab one or two skills and then apply it to the forex market.
Alvin: Can I say that because you actually got hurt in the market, it spurred you into studying the market even more diligently?
Sam: Yes. That is why nowadays when I do my own seminars, I always stressed the proper financial education.
Alvin: You were saying that at 18 years old you started investing, that is a very young age, so what piqued your interest to even get started at that age?
Sam: I think I have to thank my uncle for it, because I spent six years of my primary school days at my uncle’s place. I was brought up by him. He was a retiree who occasionally dabble in the stock market. During those days or even today, he doesn’t use the computer, but only the Teletext. I became fascinated and I asked him why these numbers keep on jumping up and down; why sometimes the numbers went up he would be very happy and sometimes the numbers went down, he didn’t look too happy? In this case, he said that I was probably too young to understand all these. I will come to understand someday. These numbers really caught my attention and when I was at secondary four I was making a decision whether to continue my studies in junior college, or polytechnic. That is where I met up with my academic counselor in polytechnic and he advised me since I have the interest in numbers and interests in areas like the stock market, probably it is advisable to take a course that is related to these areas. So I decided to take up accounting and finance at Temasek Polytechnic.
Alvin: I believe everybody will envy you because you found your passion so early in your life.
Sam: Thank you. Indeed it is a pleasure and a privilege. I do have a lot of friends who said that they have been working for the sake of working and doing things that they are not passionate about if not for the bread and butter. I am glad that I am able to do something that I am passionate about and I intend to further this.
Alvin: I can see your passion in investing as well. And I believe that is why you started Wisdom Capital at the young age of 22, what actually inspired to start a company? You could have just invested on your own.
Sam: I think based on my experience, I mentioned earlier on that I went to the stock market without any form of financial knowledge, after some form of reflection I felt very insecure. And I realized that this is something that I have learned and I have benefited from this experience, I hope to empower retail investors the importance of financial education. It is with this that I started Wisdom Capital in July 2009 with a partner.
Alvin: What kind of service does your company offer?
Sam: Wisdom Capital is actually a local wealth coaching firm that specializes in providing workshops and seminars in areas of financial and investing. We have three targeted segments, they are corporations, schools as well as the public. We have different kinds of workshops ranging from pure investing planning in the areas of fundamental and technical analysis, to comprehensive financial planning which includes risk management, insurance, legacy planning, trust, retirement planning, as well as education plan. I have to stress that I am not a financial planner, neither am I an insurance agent. It is also very important for me to highlight I am not tied to any of the insurance company, as well as any of the advisory firms. That is why I am in a very good position to look at the market, to look at the investment products very objectively. I would assess the products and share with my seminar participants what are some of the suitable products available, what are some of the appropriate financial planning concept that they might want to adopt in their quest to achieve financial freedom. In 2012, we are going to do an outreach programme. We intend to partner MAS’s Money Sense to do a one year outreach programme, aim at promoting true financial literacy to the schools, corporations and the public. We will be holding regular seminars in the form of financial planning and investment planning.
Alvin: You mentioned that you actually discussed about products that are suitable for retail investors, would you think that such portfolio structuring would be more personal, and it depends on different individual’s needs. It will be more difficult to generalize.
Sam: When I say looking at a product, I am actually referring to the asset classes available in the market. For example, for the upcoming seminars, I will be touching on ETF products – what are the benefits, what are the costs that are associated with ETFs. Who are the ones that are appropriate to invest in ETFs? Based on your risk profile, your risk tolerance level, are you suitable to invest into cash-based ETFs, or synthetic ETFs? This is an example of showcasing the relevant product in the market. Because of the fact that I am not a licensed financial advisor, so I stay clear of recommendations like invest into XXX product or YYY product or ZZZ product, because I do not want to make any form of misrepresentation.
Alvin: It is because you do not have a license to actually provide financial advice, so you have to stick the general characteristics of products, and let the audience decide on their own which one is suitable for them, based on their own risk profile.
Sam: Usually what I will do is I will showcase my own investment portfolio and my statements of account. They can use these as a reference. My targeted audience ranges from eighteen year-olds, all the way to sixty-five year-olds. Eighteen to sixty-five is huge. The risk level is probably higher for eighteen year-olds, while at sixty-five, the risk level is significantly lower. I try to structure the seminars in such a way that I will try to touch on different asset classes weekly or monthly. So recently because of the MF Global incident, I talked about CFDs. I talked about the whole structure and the product itself.
Alvin: Talking about portfolio, would you share with us what your current portfolio is?
Sam: I am currently overweight in commodities or specifically, gold and silver. I think for Q4 2011 and 2012, I will be underweighting on equities because of the ongoing global financial crisis and the Euro debt crisis. Unless there are really cheap bargains, I will be staying clear of equities, and I will be looking to park my money in commodities. At present I have a portfolio holding in SPDR Gold Shares ETF as well as in iShares Silver Trust. These two formed the bulk of my portfolio currently.
Alvin: Are you still holding onto any equity at the moment?
Sam: No. Because I am waiting for cheap bargains to appear.
Alvin: Would you go short if the market proved to be a bear market?
Sam: I do short CFDs at times. I do short the market, especially futures. I will give you an example, SIMSCI, the Singapore futures, and sometimes if I have a very bearish view on the market, I will short it. Another example I can think of is shorting CFDs mentioned earlier on. Let’s say I decided to take a very bearish view on a certain company, I will short CFD. But then this is very rare because I take a macro view and for macro view I decided to venture into the forex market. I think it is more exciting.
Alvin: More suitable for your age I guess, where you need the adrenaline rush from the volatility.
Sam: I will tend to agree because my own risk tolerance is extremely high. In fact I will call myself a growth or aggressive investor. I am able to stomach a higher level of risk.
Alvin: How would you categorize your own style of investing? Do you consider yourself a trader or a value investor?
Sam: I am more of an investor rather than a trader. I always take a very long term view on all my investments. And that is why for my strategic portfolio, I take a very long view on gold and silver. This commodities portfolio is really for investment purposes. They are not for any form of speculative or trading purposes. I also have a tactical portfolio. This tactical portfolio allows me to look at certain chart patterns, certain down trends or certain up trends. If I spot any opportunity, I can leverage on it mainly through the forex instrument.
Alvin: When you talked about your tactical portfolio, I believe it would be rather short term, what kind of time frame are you looking at?
Sam: Very short term ranging from intra-day position to one month. In this case, I do know some people will say that tactical portfolio is just to alter the percentages of your strategic portfolio. Yes it is. Let me explain how I go about doing this. I start off by looking at my own risk profile. I identify myself as a growth and aggressive investor. My overall asset allocation is about eighty percent to twenty percent – eighty percent is to growth instruments, not just equities but growth instruments. Twenty percent to fixed income instruments. In this case I do not have any exposure right now. I am probably looking into investing in a few bonds unit trust funds in the future. But right now my twenty percent consists of cash. Eighty percent is based on growth instruments. Out of this eighty percent, I look into investing in various growth instruments that are available. For example, equities and commodities. Structured products are out for me. Hedge funds are definitely out for me. I mainly concentrate on equities as well as commodities. I have a tactical portfolio in this case, that allows me to periodically do some form of asset allocation. For example, although I am eighty-twenty right now, I can go ninety-ten. If I go ninety-ten, I will take out ten percent from my cash portion, and put into my capital portfolio. And this ten percent, I will use it for any form of investment, any form of intraday to as long as one month kind of position. Three weeks ago, I shorted EUR/USD, and recently I just long the EUR/USD. These are short positions. I try not to have too many positions that are too long for forex.
Alvin: Your tactical portfolio would comprise about 10 percent most of the time?
Sam: Yes for me to do some form of asset allocation. On the other hand, let’s say I decided to overweight on fixed income, to seventy-thirty, I will just put it as cash as I do not invest in bond funds or fixed income usually. I can use the cash when opportunities arise.
Alvin: So it is rather dynamic. For your strategic portfolio, how often do you change the composition or the asset allocation?
Sam: In fact, seldom. How I formulate my investment strategy is that I use a thematic style of investment. I look strategically, along the lines of investment themes. Then I will drill down to the industry and followed by the company. In short, it is a combination of EIC (Economic –Industry-Company) approach and a thematic based kind of investing. This will allow me to look at industry, look at the trend, look at what are some of the themes that are likely to do well. From here on I can spot any investment opportunity. I give you an example which I have already sold off this particular stock. I have identified that one of the bull investment themes is the rising affluence of Asian middle class. As the rising affluence of the Asian middle class continues to remain strong, there are going to have many spillover effects on various industries. Few of them are the banking, construction and property industries. But I will stay away from construction and property companies because of the anti-speculation measures introduced by the Chinese government. The banking sector is quite interesting in China. I actually invested in CCB (Chinese Construction Bank) and I sold it off when it reached my price target. I decided to look at other investment themes again.
Alvin: From what I gather, it is more like a top-down approach, where you actually look at the global picture, probably which country would have a better economic growth, and then you drill down to the industry and then to the company in specific.
Sam: In fact, I actually have worked with Shares Investment to come out with a series of investment articles, in the areas of retail investing. I started off writing two and I am going to put out the third one pretty soon. And the fourth one will come out at the end of this year. I will be talking about thematic investments and how retail investors can benefit from it. It is so exciting that so many plans and investment themes that they can look into it. Consumers always ask how to invest. I always tell them there is a need to have a framework and a system in place. One way is to adopt top-down thematic investment, where you drill down to the industry and the company level. You also need to convince yourself that these themes are here to stay at least twenty to thirty years, and take a long term view from there.
Alvin: So the time-frame is about twenty to thirty years. How do you get so confident that about certain industry or company to invest for twenty years? It takes a lot of gut.
Sam: I wouldn’t say that I would invest in a company for twenty years. But I would want to hold the assumption that my investment theme is likely to stay or likely to remain relevant for twenty or thirty years. I engage in very intensive research. I really look at market trends and research through Bloomberg and industry experts. I also look at past research reports from Goldman Sachs and JP Morgan. I look very carefully at what they write, and I form a subjective judgment on the investment theme. I may be wrong, but any form of investment has to be backed up by intensive research; decipher what the global economy is trying to tell us, and then come out with a judgment.
Alvin: How do you actually follow up with all these developments? How much time did you allocate to research? Probably every day?
Sam: Yes. I classify myself as a night owl. When people are sleeping, I am looking at the US and European market because I think they are much more exciting and this is also when the bulk of investment activities and news are coming out. I spend close to fifty percent of my time devoted to my studies, certain amount devoted to my work where one of the job scopes is to look at trends, patterns, and to reaffirm the investment themes are really sustainable. And if I feel that the investment themes are not likely to be sustainable anymore, I will make the decision to pull out. Just now I talked about construction and property industries. I understand that the Chinese government has been introducing a series of anti-speculative measures and this is one example where I do sell off my holdings. I give you another example, I am riding on green venture or sustainable energy technology. I haven’t had the time to really look at companies, but I really feel this is a very exciting industry. They are growing about twenty-five to thirty percent annually. This industry is going to offer tremendous opportunity considering the very chaotic climate and weather patterns that we experience nowadays; floods, droughts etc. I will be exploring in the very near future for any cheap bargains for long term investment.
Alvin: It seems like you are looking for more like growth companies. In that sense, do you actually buy small caps because there would be more room for them to grow as compared to very large corporations, where they are very established with limited growth area?
Sam: I do look at penny stocks or small cap stocks, at the same time I also try to strike a balance with blue chip stocks into my portfolio because I am also concern with beta of my portfolio. I think if you take care of the downside, the upside will take care of itself. Naturally, I would want to do a balancing act by ensuring I am not overly leveraged, and in the process of managing my own beta, I am able to chase my alpha.
Alvin: You were saying you actually trade forex as well, you also mentioned about SIMSCI, sometimes you would short it, how do you manage so many kinds of instruments – futures, forex?
Sam: Basically what I do is I do not trade every single day. In fact, for futures, I do not go into the market unless I am pretty sure the market is heading north or southwards. And I try to take an intraday position, rather than five days or a week, because the market is very volatile and I make it a rule not to engage in any form of margin call. Likewise for forex, the same thing happens, I do not trade every day. I have very deep respect for Derick Tan, I think he is a very good trader and he shared with me that he trade at the right time. So what I do is I try to structure in such a way that I only take the position when I form a subjective judgment on the direction, and I try my best not to trade for the sake of trading.
Alvin: It is not like when you have free time, “I can just trade”.
Sam: Investment is really something very tempting especially when you see your account size going up and down. It is something I try my best to stay clear. It is equally tempting to hear people mention how much money they had made. You will be tempted to take a position for the sake of taking one. This is definitely something that I will always share with my seminar participants to avoid it at all cost. If you trade for the sake of trading, I am very confident that you will lose money ninety percent of the time.
Alvin: I agree. And how often do you actually formulate such trading ideas?
Sam: Correct me if I am wrong, are you referring to the investment themes?
Alvin: No, I am asking how often do you use your tactical capital to trade? How often do such opportunities come about?
Sam: I monitor the market every day but I do not form an opinion every day. I do trade futures probably once every three weeks, or even once a month. For forex, I trade once every two to three weeks. That’s why I am more of an investor as I try my best not to go into the market unnecessarily. Recently it has been heaven for traders, some of them are making a lot of money by taking the roller coaster ride.
Alvin: With regard to trading, how do you enter and exit the market? Do you use any technical analysis? I understand you have some subjective judgment of the trend of the market, but do you use any additional tool to help you decide when is the best time to enter and exit?
Sam: Yes, technical analysis forms eighty percent of my overall analysis. I subscribe to charting software such as Chart Nexus. I also have my own specialized technical software. I always look at the trend, and I do use indicators but I try to shy away from additional indicators like MACD and RSI. I am not sure why some of the industry veterans will say that using MACD and RSI are very good but personally I feel that they are not as effective as some other indicators.
Alvin: You mentioned even for your strategic portfolio, you actually have a target profit?
Sam: Yes. Because I do use valuation models like Free Cash Flow to the Firm (FCFF) and Free Cash Flow to Equity (FCFE). I use Excel to create my own modeling tools and I can show you how I use it one day. I try to compare my results with the analysts’ valuation, and see if there is any discrepancy. I use Discounted Cash Flow (DCF), FCFF and FCFE for different kinds of industry. Sometimes I also use Dividend Income Model for companies with high dividend yield. The bottome line is that I try to identify a target price for a particular company by using these valuation models. In short, I am behaving like a private analyst because I always believe that before we execute any investment decision, it is really very important to substantiate it with intensive research and market trend analysis.
Alvin: So you use traditional valuation models to find the company value.
Sam: Yes. I give you an example, I will use the FCFF model if I were to evaluate Capitaland. This is because it is a property counter and the Net Asset Value (NAV) is very important. I use NAV to calculate the FCFE and FCFF, and determine the Weighted Average Cost of Capital (WACC). Lastly, we arrive at the terminal value of this company.
Alvin: Are these covered in your courses or seminars?
Sam: Yes, for advance.
Alvin: I guess those people who want to know more can subscribe to your course and learn more from you.
Sam: Thank you, yes.
Alvin: I also saw your interview on Sunday Times, I actually have it with me here, it says here “23-year-old made $400k from stocks”, did you really make $400k from stocks?
Sam: I was quite shock when I look at the title and quite a lot of my friends called me up. I would say the amount is close to $400k, but it is not $400k. Probably because I told her the breakdown of the portfolio whereby I did it through a series of short investment in equities and forex. I was able to double my money in a day in forex and I went back to the stock market again. I read online that some of them actually said I was in a bull market and can make money with any stocks. I cannot deny that I was lucky but I have to stress that I go about executing my investment decisions solely based on thematic style of investment. I do not go into the market and buy any stocks that I fancy.
Alvin: And the interview mentioned about you bought a property in the East Coast area, are you still holding on to it?
Sam: Yes. Because I made this amount of money from the stock market and I realized that I wanted something a bit more stable. Initially I started out by wanting to create an extra investment avenue for myself or an extra passive income. I realized that I going to hold it for long. I do not hold hundred percent of it and I co-own with a very good friend of mine. I have severely cut back on my equity holding. I still invest in the stock market but definitely not as much and not as frequent as previously.
Alvin: At your young age, when you conduct seminars and courses, do people actually take you seriously for what you say? Or do they think that you are just a young kid without much experience, compared to the number of bear market they went through and the amount of money they have lost, and then you are telling them how to invest their money.
Sam: In fact, I face this frequently. I always admit I am young. I have a very diverse targeted market segment, from eighteen year-old to sixty-five year-old. For the eighteen to twenty-four, it is more like sharing. But for the forty-five to sixty-five, I am young enough to be their son or grandson. I always showcase to them during my seminars and I share more. Usually after the seminar, they will say they benefited from it and they want to sign up. This is what keeps me going. I am not sure you watch soccer. I like to position myself as a young player, in this case a young English player, trying to get into the England national team. In the industry, there is a lot of established professionals like your mentor Dennis Ng, I have huge admiration for him. I see him as one of the core players in the England team, probably a John Terry or Frank Lampard. I hope that one day I will be in the position to get into the England team like him. This is how I position myself, hard work. I will always remain humble, I will not go around and say that I have a condominium with me. I always believe that there is a lot of things to learn. Right till today I believe that I have so much to learn from Dennis, I have so much to learn from Derick, and some of the other established veterans in the industry. And I believe that this will form the basis and fundamentals for the rest of my career. I will never stop learning.
Alvin: I have confidence that you will be there!
Sam: Thank you!
Alvin: What are your plans when you graduate?
Sam: I am quite open. Of course I want to continue running Wisdom Capital, it is my lifeblood and my passion. I want to do it for the rest of my life. My parents were also suggesting that after all I am twenty-three, and it is also good for me to go to the industry and get some relevant experience with some of the banks and brokerage houses. These are probably some of the plans I am considering.
Alvin: How about for Wisdom Capital? Any plans five years ahead? Do you intend to expand your business?
Sam: For 2012, we have just concluded our strategic planning. We want to create a greater outreach, and that is why for 2012 we work very closely with Securities Investment Association (Singapore) (SIAS), Monetary Authority of Singapore (MAS), Central Provident Fund (CPF) and other organizations, to try to promote financial literacy through a series of talks and seminars conducted by Wisdom Capital. For 2013, we are looking to expand into Malaysia. In fact, we have already started our preliminary venture into Malaysia, by working with this organization called AKPK, which is the equivalent of Money Sense Singapore.
Alvin: You intend to expand overseas for the next few years for Wisdom Capital.
Sam: If I graduated and let’s say I decided to do Wisdom, then yes, Malaysia will be a primary market to look into it. It is a very interesting market and something that I really enjoy when I was there doing four talks with four different universities. Students there are enthusiastic and always hungry to learn. They really show their appetite in wanting to master the art and science of investing. It is something that I have huge admiration for them also. And I am always very keen to go back to share with them.
Alvin: Relatively, comparing them to Singaporeans, are we less hungry because of our comfortable lives?
Sam: I would say it depends. I think for Singaporean university students including myself, we are much more critical and skeptical. We tend to question. Whereas for the Malaysian students, they question but in a very sincere and enthusiastic manner. You can really see this hunger within them to master the art and science of financial planning. It is hard to explain with words. It is really something that you got to be there to experience it yourself. That is why I have fond memories and I really love going back to Malaysia.
Alvin: If someone is really interested in going for your seminars and any of your courses, how to go about registering for it?
Sam: They can email to our company’s email address and contact us at wisdomcapital.com.sg, and then my staff will arrange with them. For 2012, we are doing a lot of corporate talks. We intend to scale down on public talks. We probably have one in January and another one in March. The public can actually attach to me as well as my company through a one-year programme that I will be doing with SIAS. I will be doing a one-year rotational programme with SIAS in the areas of asset management, budgeting, financial planning and investment planning.
Alvin: Those who are interested can sign up at wisdomcapital.com.sg using the contact form. We have come to the end of the interview, thank you Sam for sharing with us his wealth of experience even though he is very young.
Sam: Thank you, my pleasure.
Alvin: Thank you Sam.
PS: Sam conducts investment and trading courses regularly. Enter your details below to find out more!