Investment value
since beginning

“Hindsight is 20/20” - we all love to say

December 15, 2018

Trying to asset allocate tactically by market is not easy. Passively’ owning the S&P 500 only this actually an active decision that forgoes...

Let’s rewind to the early 70s:

Nixon was President.
Mao was Chairman.
Elvis was on tour.
The first pocket calculator was released.
Japan’s stock market was the darling of the investment world.

From 1970 to 1979, Japan’s stock market was up 396% versus the US, which was only up 77%.

Then the 80s happened:

Michael Jackson released Thriller.
E.T. was the highest grossing film of the decade.
The War on Drugs began.
Apple Computer introduced Macintosh.
Japan’s stock market remained the darling of the investment world.

From 1980 to 1989, Japan’s stock market was up 1,143% versus the US, which was only up 404%.  

Japan’s stock market grew so big that it accounted for 45% of the global stock market cap. The US followed at 33%. Eight out of ten of the largest corporations in the world were Japanese.

And the 90s were interesting too:

The World Wide Web arrived.
Friends and Seinfeld ruled TV.
We all bought a Discman.
Microsoft hit its stride.
Global warming became a concern.
Japan’s stock market lost itsluster.

From 1990 to 1999, Japan’s stock market was down 7% versus the US, which was up 433%.

The 2000s were globalising:

The iPod showed up, then the iPhone.
9-11 shocked the world.
Euro was adopted.
Google and Facebook connected all of us.
The global financial crisis.

From 2000 to 2009, Japan’s stock market was down 30%, the US was down 9%, and emerging markets led the pack, up 162%.

Decade-by-Decade Returns of Global Markets (USD)

Over the course of 20 years from 1970 to 1989,
Japan market rose over 6,100%,
US market rose 890%,
and the rest of the developed world rose just over 1,100%.

How would you have positioned your investments for the future at that point in time? It would have been easy to say Japan was overheating after the 1970s, but you would have missed another ten years of Japan’s dominance.

In the following 27 years from 1990 to 2017,
Japan returned a pathetic 120%,
The US returned 1,374%,
and the rest of the developed world rose 1089%.

Trying to asset allocate tactically by market is no easy feat. Some investors say they want to ‘passively’ own the S&P 500 only, but this is actually an active decision that forgoes most of the world.

We prefer to own a truly globally diversified portfolio - one that we can stick with through geopolitical, economic, and pop culture shocks.

It will likely not be the best performing portfolio at some points in time, as it will be dragged down by its level of diversification. But that being said, it will avoid the far bigger evil: periods of missing out on stock market growth in other parts of the world.

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.


How the 0.001% invest (The Economist)

This San Francisco investor wants to revolutionize private equity. Is he crazy? (Institutional Investor)

A surprising push by the invisible hand: Why more companies are doing better by being good (Forbes)

Startups aren't cool anymore (The Atlantic)


2019 forecast: Predictions will be wrong, random or worse (Bloomberg)

Why do so many people fall for financial scams? (The Economist)


Laws of attraction, dating and factor-based investing (Business Times)

Singapore's US$200k starter salaries: Why education pays the price (SCMP)

All together now: The growing co-living scene in Singapore (Business Times)


Jeffrey Sachs: The war on Huawei (Project Syndicate)

Uber is headed for a crash (NY Mag)


TED: What does everyday courage look like? (NPR // 12 mins)

Good to Know

How Tim Cook, CEO of Apple – who buys his underwear in sales – spends his US$625 million fortune (SCMP)

Real crazy rich Asian wedding to cost $100 million (Bloomberg)

Why are we still so fat? (NY Times)

The joy of no-gift Christmas (The Atlantic)

2018 wasn’t a complete horror show. Here are four things that probably got better. (Vox)

Researchers found one way that long-term marriages get happier (Qz)

Your apps know where you were last night, and they’re not keeping it secret (NY Times)

When you can’t see the forest for the trees

November 30, 2018

Sometimes you need to take a step back to see the bigger picture. Money, or rather our investments and life assets are no different. 

A holistic approach to asset allocation

Water Lilies (1914-26)
Source: Joy of

The paintings can look like an abstract blur of colour from up close. But when you take a few steps back, the seemingly random strokes transform into water lilies and the reflection of the clouds above, capturing the constantly changing light and its interplay with the landscape. There are benches placed at MOMA several feet away from the paintings so that visitors can view and appreciate this monumental triptych in its entirety.

Sometimes you need to take a step back to see the bigger picture. Money, or rather our investments and life assets are no different. We tend to put things in buckets. For example, when we think of our asset allocation, we focus on the split between stocks and bonds in our investment portfolio. But anything of value can be considered an asset - from traditional public market securities like stocks and bonds, to cash deposits at the bank, to private investments such as real estate or your wine collection. We should think about our overarching allocation of wealth in a holistic manner across all our assets.

Most of us have cash in one or two bank accounts, some unit trusts with one brokerage, a mix of stocks and bonds with another brokerage, a CPF account with a mixture of cash and CPFIS investments, restricted shares from a former employer, some real estate or private business interests that should all be taken into account. Because in reality, we have one investment portfolio that is just divided into separate buckets. In aggregate, the buckets form one portfolio with its own risk and return characteristics. But it’s difficult to understand what these are when we focus only on the separate buckets.

Let’s say, for example, that your total net worth is $1 million with:

  • $250,000 in deposits at the bank;
  • $100,000 with Broker A, where 50% of your portfolio is in cash;
  • $100,000 with Broker B, where 10% of your portfolio is in cash;
  • $200,000 in CPF, where 30% is sitting in your OA; and
  • your property makes up the bulk of your remaining net worth.

Do you want to have a 37% ($370,000) allocation to cash? Is this overall allocation in-line with your investment goals and risk tolerance? You may not even have realized this.

Being a financially efficient person means allocating your wealth holistically so it works towards your goals. It does not matter if your investment portfolio did great last year if you had a huge over-allocation to cash.

Taking a holistic approach to your portfolio means looking at all your assets as part of a whole, rather than viewing them as separate buckets.  When you only focus on the details of each ‘bucket’, it’s easy to lose sight of the forest for the trees.

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


The $200 trillion gold rush that has reshaped private banking (Bloomberg)

How the geography of startups and innovation is changing (Harvard Business Review)<

How a Chinese robotics company made Segway (almost) cool (The Economist)


The stock market doesn't care about you (A Wealth of Common Sense)

Why you would not have invested with Warren Buffett (Behavioral Value Investor)

A guide to China's $9 trillion shadow-banking maze (Bloomberg)


Singapore's next leader Heng Swee Keat: Media's love affair only tells half the story (SCMP)

Go-Jek president outlines plan to break Grab’s dominance (Channel News Asia) 


Applying artificial intelligence for social good (Mckinsey)


Malcolm Gladwell: What does spaghetti have to do with happiness? (NPR // 18 mins)

Good to Know

The 'Geno-Economists' say DNA can predict our chances of success (NY Times)

The life-changing art of asking instead of telling (Quartz)

China's 'most beautiful criminal' turns herself in (SCMP)

The 100 greatest innovations of 2018 (Popular Science)

Stories behind some of the world's most iconic candies (NY Times)

The miseducation of Sheryl Sandberg (Vanity Fair)

Secret luxury homes: how the ultra-rich hide their properties (FT)


What Singapore-based investors need to know before investing in unit trusts or ETFs

November 25, 2018


 When it comes to investing, Singapore investors have plenty of options to explore since our country is one of the leading financial hubs in Asia. Experienced investors can choose to invest in a diverse range of stocks or bonds, directly on the Singapore Exchange (SGX).

Investors who prefer a more hands-off approach can also invest via their financial advisers, who will normally recommend unit trusts, also known as mutual funds, for them to invest into. Some financial advisers and more recently, “robo-advisors” may also recommend investing in a portfolio of ETFs.

Unit trusts and ETFs are funds that pool together money from different investors for a fund manager to invest, on behalf of the investors, in assets that they believe generate a return for the investors.

Before you decide to park your money in a unit trust or ETF, it’s important that you first understand some of their key characteristics. Doing so can help you identify the right funds to invest in.

Investment methodology
Every fund has an investment methodology. This methodology should communicate the approach that the fund managers will take for their investment decisions. For some funds, this could be something relatively straightforward, such as investing in the equities of the biggest 30 companies in a particular country or region or tracking a certain index.

Other funds may have their own investment philosophies, such as traditional active stock-picking, or systematic strategies.

For example, Dimensional Financial Advisors (DFA) is a global investment manager that believes that the market is already able to do what they do best – reflect all available information into prices. DFA takes a systematic approach to investing and focuses its efforts on creating more value for its clients through its evidence and financial science-based construction of portfolios, delivered in a cost-efficient manner. They systematically tilt their portfolios to buy more stock of companies with certain characteristics, such as smaller size, value, or profitability. They do so because scientific research has shown that they are the only three proven factors of return that improve returns over the long term. They also believe this is an approach they can stick to, even during challenging market environments.

When you invest in a fund, it’s important that you know and understand the investment methodology of the fund and the track record of the fund managers running it. This methodology has to resonate with you. Otherwise, you will be investing in something that does not make sense to you, and when markets become volatile, you may struggle to stay invested

What the fund is investing in
There is a common misconception among new investors that investing into a unit trust or ETF means you are automatically building in broad diversification for your portfolio. This is not always true. You need to have an overview of what your fund is going to invest in. Typically, this can be segmented into a few key areas:

Location: The area or region the fund invests in. For example, the fund could invest globally or in only developed markets, or focus specifically on regions such as the US or Asia, or just single countries like China or India.

Sectors or themes: The industries the fund can invest in (i.e. technology or healthcare) or thematic funds (i.e. ageing or automation). 

Asset classes: Some funds invest strictly in equities only. Some funds invest in bonds or commodities. Others take a balanced portfolio approach, with a mix of both equities and bonds for example.

These are just a few broad areas that you should consider before investing in a fund. You should invest in unit trusts and ETFs which hold assets that you are comfortable owning.

You choose the fund, but the fund manager chooses the underlying investments
This simple statement is one that defines what investing in a fund is all about.

When you invest in funds, what you are essentially doing is choosing the fund managers, instead of the actual individual investments. The fund managers then choose what to invest your (and all the other investors’) money in. Even fund managers managing passive index-tracking ETFs will make active decisions in choosing a sample portfolio of securities to best replicate the underlying benchmark, because it may be too costly to mimic underlying indices entirely.

It’s ironic that many new investors do not pay enough attention to who is managing their money. If people who invest directly are already doing so much research on the assets that they are putting their money into, shouldn’t we be doing as much research on the individuals whom we are entrusting our money to?

When you park your money with fund managers, don’t take it for granted that all funds are equal. You should try to find out as much as you possibly can about the fund and the fund managers. Remember, they are the ones responsible for investing your money and making a return for you.

The fees you are paying
You invest because you want to generate a return and grow your wealth. However, if you invest through a unit trust or ETF, you will also incur an annual management fee (also known as the fund’s total expense ratio). Naturally, these fees eat into your investment returns.

New investors sometimes ignore small differences in management fees, thinking that the difference of 0.5% or 1.0% per annum doesn’t really matter. This is wrong.

Consider the example of an investor who invests $100,000 today and earns a return of 7% per annum for the next 30 years. Here’s how his returns will be impacted by just a small increase in fund management fees:

  • Scenario 1: Fund A charges him a management fee of 1.0%. After 30 years, his portfolio is worth $574,349. He would have paid a total fee of $84,801.
  • Scenario 2: Fund B charges him a management fee of 1.5%. After 30 years, his portfolio is worth $498,395. He would have paid a total fee of $116,129.
  • Scenario 3: Fund C charges him a management fee of 2.0%. After 30 years, his portfolio is worth $432,194. He would have paid a total fee of $141,521.
The management fee is just one type of fee that you pay. For unit trusts, other common fees include initial sales charges, payable when you first invest, wrap fees, as well as redemption charges, which may apply when you redeem units. For ETFs, you will be charged a brokerage fee when you buy or sell. All these additional costs will eat into your investment returns.

In the example above, you can see that a difference of 1.0% per annum in management fee works out to be more than $142,000 difference in returns over a 30-year period. This is based on an initial investment of $100,000 and a return of 7.0% per annum. If the investment is larger and the returns are higher, the fees will be higher as well.

Invest wisely
At endowus, we believe that for long-term, buy-and-hold investors who do not need intra-day trading liquidity, it may be more effective to invest in unit trusts which trade at NAV, rather than trying to time the market when you invest in ETFs and  potentially paying more than what the underlying assets of the ETF are worth.

At the same time, we believe in keeping our costs low, so that our clients keep more of their returns. Our all-in Access Fee is from 0.25% to 0.60%, depending on your assets under advice. This all-in Access Fee includes advice, investment, rebalancing, transfer and brokerage, all at a fraction of the industry average. On top of this, you pay a fund-level fee of between 0.50% to 0.56%, which is charged by the fund managers out of the fund’s daily NAV.

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.

Durians and diversification

November 17, 2018

Diversification is an investment principle that we all know we should be following. But we also need to understand what diversification is not:

What diversification is not

There are some things we can all agree on. Books are more enjoyable to read in paper form. Durian should be a superfood. Also, that diversification is a good thing. It’s an investment principle that we all know we should be following. Who doesn’t want to take less risk and enhance their portfolio returns at the same time? (a.k.a a free lunch?)

But we also need to understand what diversification is not:

1) You can’t diversify your way out of a financial storm
Having a diversified portfolio will not protect you from market volatility in the short-term - you will still have big down days or even consecutive months of losses. It will not prevent bear markets and it cannot protect you against market reactions to Trump’s latest Tweet. Diversification may or may not help in the short-term, but it’s really a strategy for the long-term investor that will help you smoothen out returns over market cycles.

2) More is not always better
Having a portfolio with more components does not mean that it’s more diversified. This might be true if all the asset returns are uncorrelated (i.e. the prices do not rise and fall together), but this is unlikely to hold true.  Also correlations are constantly changing, even assets that were uncorrelated in the past may be in the future.

Each asset you hold is less important than how they interact together (known as covariance) to reduce your portfolio’s overall risk. The marginal benefit of adding another investment decreases past a certain point . This means adding a 20th fund to your portfolio will probably not meaningfully improve risk-adjusted returns, and your advisor might just be building you a very complex portfolio to justify their own existence and high fees.  

3) Diversification is not exciting
In fact, it’s pretty dull to talk about a portfolio that gives you globally diversified exposure to the world. You’re not going to hit any home runs like Amazon, but you’re also less likely to strike out with all your life savings in Lehman Brothers. You can leave the excitement to other parts of your life - being able to live the life you want after retirement is exciting, but the path to growing your retirement nest egg to get there doesn’t need to be.  

Diversification is a strategy that plays out over a long period of time, and give you a greater chance of achieving your goals without having to predict how the future will turn out.  As Howard Marks said:

“You must be diversified enough to survive bad times or bad luck so that skill and good process can have the chance to pay off over the long term.”

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


Morgan Stanley's mutual funds, investment bank and Palantir dispute over Palantir's valuation (Bloomberg)

The inside tale of how Nokia lost a market it dominated (The Economist)

Desperate Chinese middle class take big risks to move money, and themselves, overseas (SCMP)


Cheap is great, but free will cost you (Bloomberg)

Causeway Bay’s Russell Street trumps 5th Avenue in New York as the world’s most expensive retail rental market (SCMP)

The market’s been falling. I’m putting my money in stocks anyway. (NY Times)


Ho Kwon Ping: How Singapore can play a crucial role in the emerging Pax Sinica by bridging East and West (SCMP)

Facebook stands ground after Singapore criticism over 1MDB post (Bloomberg)

Go-Jek partners DBS to offer regional payments services (Straits Times)


Into the Brexit endgame (The Economist)


TED Radio Hour: Why do we undervalue introverts? (NPR // 18 mins)

Good to Know

Dizzying heights: Vertical tourism in China (The Atlantic)

These guys deal with cannabis in Singapore - and don't feel paranoid (SCMP)

Louis Armstrong’s life in letters, music and art (NY Times)

16 popular psychology myths you probably still believe (Nat Eliason)

Stan Lee, the progressive genius: A tribute to Marvel's mythmaker (The Guardian)

Low carb diets are still a metabolic mystery (Popular Science)

UK still top of the class for rich Asians (SCMP)


Why we are not wired to invest

November 11, 2018

Humans are constantly frustrating for economists - we don’t act like rational beings and follow their models. 


The amygdala - frantically processing mortal danger and financial losses.

“A bowl of fishballs and noodles cost $1.10. The fishballs cost $1.00 more than the noodles. How much does the bowl of noodles cost?"

If you thought the bowl of noodles cost $0.10, don’t feel bad. (The correct answer is $0.05 for the noodles and $1.05 for the fishballs). Nobel Laureate Daniel Kahneman discovered that more than 50% of students at Harvard, Princeton and MIT gave the wrong answer.

Kahneman’s research shows that humans are constantly frustrating for economists - we don’t act like rational beings and follow their models. Our immediate reaction to situations is not based on a careful evaluation, but rather mental shortcuts formed by our cognitive biases.

The truth is, we’re just naturally wired to be bad at investing.  According to Jason Zweig, who published a book on how the brain affects financial decisions, financial losses are processed in the same area of the brain (the amygdala) that responds to mortal danger. You get the same primal ‘fight or flight” reactions: your heart races, your breath quickens and you break out in a sweat. Even the expectation of losses can set off bursts of activity in the amygdala, and the more frequently you’re told you’re losing money, the more active the amygdala becomes.  

Watching your investment portfolio fall in value can have a longer-term impact psychologically, and as a result, affect your investment plan. When you have a losing streak, it activates the hippocampus, a part of the brain next to the amygdala that programs our memories of fear and anxiety.

Research from Cambridge also shows that when we have higher levels of the stress hormone cortisol, our risk aversion spikes. Risk takers will exhibit risk averse behaviour during periods of high market volatility, and act in the opposite manner of what a rational investor should be doing. This could explain the ‘irrational pessimism’ during financial crises.  

We feel the pain of a loss twice as much as the joy of an equivalent gain. Our basic instincts, which served us well as hunters and gatherers, don’t necessarily have the same benefits today:

  • During our caveman times, anyone who underestimated a risk would have made a quick snack for a carnivorous predator. However, no harm would have come to you if you reacted quickly and climbed up a tree when you thought you saw a lion in the distance, even if it turned out to be a false alarm.

  • In the world of investing, if you panicked every time your investments dropped and liquidated your portfolio, you would have caused serious harm to your long-term returns.

We are wired to be irrational investors because our ancestors survived on the same mechanisms. Unfortunately, it is hard to kick a 100,000-year-old habit when playing the stock market. We naturally struggle to separate primal emotions from our investment decisions.

Having a long-term, well thought out investment strategy will give us the best chance of overcoming our human impulses, shifting investment decisions from our primal to modern brain (the frontal cortex) responsible for problem-solving, memory, judgement, and reasoning. This will give us the highest probability of success in reaching our financial goals.

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


WeFlat: China’s internet titan has had a bruising 2018 (The Economist)

Millennials dreaming of retiring at 30 have a math problem (Bloomberg)

Alibaba Singles' Day smashes US$25 billion sales record (Channel News Asia)

The 1MDB saga reaches Goldman Sachs (The Economist)


Hedge fund paychecks, revealed (Institutional Investor)

Things you see during every market correction (A Wealth of Common Sense)


 Trump and Kim, Crazy rich Asians, and ASEAN: Singapore's riding high (SCMP)

Govt agencies initiate action over article linking PM Lee to 1MDB (Straits Times)


What if the placebo effect isn't a trick? (NY Times)


How the Silicon Valley elite duped the entire world (Vanity Fair // 85 mins)

Ray Dalio discusses major financial crises (Bloomberg // 55 mins)

Good to Know
Why is art so expensive? (Vox)

The irresistible urge to build cities from scratch (Bloomberg)

Tech C.E.O.s are in love with their principal doomsayer (NY Times)

Inside the booming business of background music (The Guardian)

The world’s art factory is in jeopardy (Artsy)

How yoga pants shaped modern fashion (The Atlantic)


What to expect when you're expecting

November 3, 2018

When you invest, you expect to get the return due for the risk taken.  


We are creatures of habit. When you go to your favourite coffee shop, you expect to get that same coffee, made by that same barista. When you go to that Thursday morning yoga class, you expect to see your favourite yoga instructor. When someone you have never seen before skips into the room and takes the instructor mat, you sigh a little and shake your head before getting on with the class.

When you invest, you expect to get the return due for the risk taken. An example: if you buy an index fund or ETF tracking the MSCI All Country World Index, you will expect it to give you an annual return in-line with its long-term average (minus costs). Though the long-term average is an indicator of what to expect in the long-run, there are very few single years of return that will fall anywhere close.


MSCI All Country World Index annual return minus average annual return (USD)

In the 23 years from 1995 to 2017, only 6 years fell within a 10% range (+/-5% radius) of the long-term average annual return of 9.12%.

Furthermore, the best and worst 12-month return in the period ranged from +59.0% to -47.9%. This is an enormous dispersion of returns.

Each year is made up of 365 days of ups and downs, sweaty palms, hair-raising news, and your beating heart. It is not easy to patiently allow the fluctuations to work themselves out.

Diversification does remove some volatility, but if you expect to achieve anything close to the average annual return every year, you will be sorely disappointed and should probably steer clear of equity markets.

Ignore the desire for gratification in getting what you expect and try to ride out the market fluctuations, knowing that you have positioned yourself for long-term investment success.

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


Start-ups ask, ‘Are we making money for Saudi Arabia?’ (NY Times)

How Pony Ma went from Halley’s Comet to building Tencent (SCMP)

Ubernomics: The social costs of ride-hailing may be larger than previously thought (The Economist)


Banks struggle with global payments that look easy for Venmo (Bloomberg)

Paul Volcker’s guide to the almighty dollar (The Atlantic)


Singapore ousts Hong Kong as No. 1 for luxury home-price gains (Bloomberg)

Raise CPF withdrawal age amid growing lifespans (Business Times)

Singapore's PropertyGuru raises S$200m funding from KKR (Channel News Asia)


‘Superstars’: The dynamics of firms, sectors, and cities leading the global economy (McKinsey)

Inside fortress Maotai: secrets of China hard liquor that’s rocket fuel for its soft power ambitions (SCMP)


Blacklisted in China: China's social credit system (NPR // 20 mins)

Good to Know

The story of how Kit Kats became a booming business from Hokkaido to Tokyo — and changed expectations about what a candy bar could be (NY Times)

Superfoods are a marketing ploy (The Atlantic)

In China, the future of retail is already here (Bloomberg)

WeWork's first school teaches math and science but yoga and farming, too (CNN)

Sea cucumbers lead China’s logistics blockchain charge (Technode)

The big meltdown (National Geographic)


Are you skilful or just lucky?

October 20, 2018

With luck on one end and skill on the other, where does investing fall on this scale?

“I think it may be true that fortune is the ruler of half our actions, but that she allows the other half or a little less to be governed by us.”
- Niccolo Machiavelli in “The Prince”


Credit: Jimmy Chin, National Geographic

On June 3, 2017, Alex Honnold scaled El Capitan “free solo” without a rope: he climbed a 3,000-foot vertical granite wall with his bare hands and some chalk, in what is probably the most impressive feat in sporting history. 3 hours and 56 minutes of sheer concentration, strength and most importantly, skill.

Buying Tencent a year ago at $354, and watching it go up 34% in 3 months to $474, then crash 40% to $282 - that can be attributed to good luck followed by bad luck.

The influence of luck on outcomes has been understood for a long time. Despite having every manipulative trick up his sleeve, political mastermind Niccolo Machiavelli acknowledged the role that luck played in successful outcomes in his handbook for future rulers. Five centuries later, Michael Mauboussin wrote about the difficulty of distinguishing luck from skill in business, sports and investing in “The Success Equation”. He shows how different activities sit on the scale of luck and skill: Chess sits on the far right of the chart (pure skill), and slots machines sit on the far left of the chart (pure luck). Where does investing fall on this scale?

Nobel Laureate Eugene Fama and Ken French published a paper ‘Luck versus skill’, where they analysed the performance of over 3,000 US mutual funds from 1984-2006 through the lens of their Fama-French 3 factor model (i.e. adjusted the performance for the excess risk that the funds took).

They discovered that in aggregate, the entire active fund universe underperformed the market by about the fees they charged their investors.  

Naturally, some funds outperformed and some funds underperformed. How much of that outperformance was due to skill and not luck? Professors Fama and French determined that only the top 3% of mutual funds outperformed consistently net of fees. But “the number that did outperform the market with a high degree of certainty was less than what is expected by random chance.” (Source: IFA)

Mauboussin believed that the reason why luck is so important in investing is not that investors are not skilful - it’s actually the opposite.

Imagine if AlphaGo, Google DeepMind’s champion-beating computer program, played against itself. The winner of each game would be more dependent on luck, as skill would be the same. This is an extreme example, but the same applies to investing.

Investors are smarter, more skilled, and have access to more information today. Collectively they have become more efficient at incorporating information into stock prices.  As a result, the outcome becomes more uniform with less dispersion of good and bad outcomes. Mauboussin calls this the paradox of skill (Source: CNBC):

As skill improves, as the average skill level improves, it actually increases the dependence of luck in determining results. Perhaps recognizing the importance of luck in investing (and life) is a skill in itself.

The more dependent an outcome is on luck, the more important it is to focus on the process. If you rely solely on luck, you may get to a good (or poor) outcome with some random probability.

A good process will give you the highest probability of achieving successful outcomes over the long-term. If markets have taught us anything - it is to be humble and admit that we are not all ‘above average’, and we do not know what the future holds. Instead of gambling our hard-earning savings and relying on luck, we would rather invest with and stay committed to an evidence-based disciplined process.

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


The Chinese phone giant that beat Apple to Africa (CNN)

It’s better to be born rich than gifted (Washington Post)

Four out of top five most successful women entrepreneurs globally are Chinese (SCMP)


Not filthy rich enough: The billionaires too poor for 2018's Forbes 400 (Forbes)

Hedge fund stars crying uncle gives industry hope (Bloomberg)

The next recession: How bad will it be? (The Economist)


Malaysia’s Rosmah Mansor, Singapore’s Ho Ching: BFFs? You must be kidding! (SCMP)

FA managed portfolio services gaining ground (Business Times)

Singapore outclasses Hong Kong when it comes to minimum home size (SCMP)


Charles Schwab has a $3.6 trillion edge on the Fintechs (Bloomberg)


Moneyland: The shadow world of the super rich and how their money moves in shell companies and offshore accounts (NPR // 21mins) 

Good to Know

Banksy auction stunt leaves art world in shreds (The Guardian)

‘Made in China 2025’: How 5G could put China in charge of the wireless backbone and ahead of the pack (SCMP)

Why would anyone ever pay $558,000 for a bottle of wine? (Bloomberg)

The retreat from meat: Why people in rich countries are eating more vegan food (The Economist)

Jamal Khashoggi: What the Arab world needs most is free expression (Washington Post)

We can now customize cancer treatments, tumor by tumor (MIT Technology Review)

Original Microsoftie: Paul Allen (The Economist)


"I'll invest when the market crashes"

October 6, 2018

No one likes to be the schmuck who invests at the peak, only to watch their investments tumble the next day. But is that worse than sitting in cash?

Why waiting for markets to crash before investing is a losing game

With Wall Street’s longest bull run on record, many readers have asked if they should wait to invest.

No one likes to be the schmuck who invests at the peak, only to watch their investments tumble the next day, and month, and perhaps years.

Meet Bob, the investor we all try not to be. He’s the worst market timer in the world and only invests right before the market crashes.  

(Case study from A Wealth of Common Sense, adapted by endowus)

  • He started investing at the end of 1972 with $100,000,  right before the US market fell almost 50% over the next year.
  • He then invested $100,000 in 1987 (after 15 years of saving), right before the market lost over 30%.  
  • His bad luck continued: He invested $100,000 at the end of 1999, just to see the market lose half its value again.
  • His final investment before he retired was made in 2007, where he invested the $100,000 he had been saving since 2000.  The markets delivered him another >50% loss.

Poor Bob was also unlucky in life.

At the beginning of 2009, after the markets were down 51% since his last investment, Bob was on a ski vacation and had a bad fall. He needed to have a hip replacement, and when he got home, found that his house had burned down.

Bob looked to his investment portfolio and was surprised to discover that he was actually a multi-millionaire - $2.44 million to be exact. He made 6.1x his money despite his terrible luck with a 7.98% annualised return (IRR).

Thinking about inheritance, Bob did not touch his hilariously poorly timed investments and instead decided to live with his children and claim insurance for his hip replacement. As of end September 2018, Bob’s holdings would be worth $11.8 million, 29.6x his initial investment, with a 10.28% annualised return (IRR).

Bob wasn’t such a schmuck after all. He saved diligently and never panicked, which allowed the power of compounding to work for him.

In fact, Bob did a lot better than many of us. According to JP Morgan’s Guide to Markets, the average investor had a 20-year annualised return of 2.6% as of June-end 2018, likely due to speculation and poor investment behaviour.

Market timing is the holy grail of money-making - who doesn’t want to buy low and sell high?  But it is impossible to get right consistently. You’re investing for the next decade or two, not the next month or year.  When the powerful financier J.P. Morgan was asked what the stock market would do next, his answer was “It will fluctuate.” Look at the long-term trajectory of the markets rather than short-term fluctuations.

It’s about time in the markets, rather than timing the markets.

If you hold cash for long enough, you will eventually see markets decline. But you’re betting that you know when the markets are near a peak or trough, and that the pullback will compensate you for the close-to-zero return you’ll get sitting in cash, and that you’ll have the discipline to put money back to work when it falls by a certain level, even if everyone else is taking it out.

Pundits have been predicting for years that a market crash is right around the corner. They’ll eventually be proven right because that’s how markets function. Worrying about investing at the peak of the market is distracting you from what you should really be thinking about: positioning yourself in the markets for the long-term to have the greatest chance of success.

If you enjoyed reading this article from The Know, you can subscribe to our weekly newsletterFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


The tyranny of the U.S. Dollar (Bloomberg)

Generation gap: Established firms try dancing to a millennial tune (The Economist)

Why 5 percent remains a glass ceiling for female CEOs (Bloomberg)


Market timing is hard (A Wealth of Common Sense)

Asian sovereign funds carve out more room for alternative assets (Institutional Investor)

Yale invests in crypto fund that raised $400 million (Bloomberg)


Asia-Pac family offices outperform global average (Business Times)

Capitalism, politics and despair: Banyan Tree’s Ho Kwon Ping goes on the record (Channel News Asia)


Why technology favors tyranny (The Atlantic)


Too little, too much: How poverty and wealth affect our minds (NPR // 50 mins)

Good to Know

How Binance became world’s largest cryptocurrency exchange (SCMP)

Kava-no: Brett Kavanaugh’s own testimony disqualifies him from America’s highest court (The Economist)

Skyscrapers too pricey for bankers are full of crypto startups (Bloomberg)

Zao Wou-Ki’s monumental triptych sells for $65 million at Sotheby’s record-setting sale in HK (Artnet)

The art of the elevator pitch (Harvard Business Review)

Mongolia: 40 years of Asia travel and nothing had prepared me for it (SCMP)

Employers are looking for ‘Influencers’ within their own ranks (The Atlantic)


An inconvenient truth - tax on US-listed ETFs.

September 29, 2018

Tax, if not careful, can shoot low-cost investing in the foot.

“In this world nothing can be said to be certain, except death and taxes.”
- Benjamin Franklin
Why US-listed ETFs are not necessarily cost efficient for you and me.

If you are like us, cost-conscious and a non-US person, US-listed ETFs are probably a bad idea. A caveat to this is that we are by no means tax experts, but we do understand the enormous effect of cost on investment returns. For this reason, tax cannot be ignored.

Yes, they are liquid, “cheap”, heavily marketed, used by robo-advisors all over the world, and in general great products...but not for non-US persons.

This may strike you as a surprise, but there are taxes that simply cannot be ignored, changing the “cost” quite drastically, especially when the ETF invests in non-US assets.

Let’s say you want to have exposure to emerging markets. The lowest cost, “cheapest” exposure you can get is Vanguard’s US-listed VWO, which has an expense ratio of 0.14%. VWO is so popular that it now has over US$80 billion in assets.

VWO also has a ~2.5% dividend yield, and therein lies the problem. As a Singapore or Hong Kong-based investor with no US tax treaty, there is a dividend withholding tax of 30% levied at the fund-level because it is a US-listed ETF, even though its underlying assets are not in the US.

Furthermore, if your country of residence does not have tax treaties with the underlying countries where these dividends are sourced, your effective dividend withholding tax could be even higher (underlying country tax plus the 30% US-imposed tax on top).

For reference, here is the list of countries that have tax treaties with  Singapore and Hong Kong, which may only get your tax down to 30% in the best case.

The “cheap” 0.14% expense ratio ETF has now grown to a cost of at least >0.85%. This ETF has now become pricey.

That is not even the end of it. Let's say you are holding a basket of US-listed ETFs when you pass away. No matter where those ETFs were invested, your US-listed assets (ETFs included) would be legally subject to up to 40% draconian US estate tax.  As an example, if you lived in Singapore and had $1,000,000 in a US-listed ETF that only invested in China, you would be liable to pay an estate tax of up to $400,000 to the US government. That does not seem right at all.

Thankfully there is a better way for us non-US persons to invest: UCITS.

UCITS (Undertakings for Collective Investments in Transferable Securities) began in 1985 as a regulatory framework to make cross boarding distribution of investment funds in the EU and beyond compliant, transparent, and with stronger protections for investors.

Today, there are thousands of UCITS funds listed by global fund managers such as Vanguard, Dimensional, Blackrock, PIMCO, etc., making their strategies available to global investors in a more tax efficient manner. Sticking with the emerging markets example, Vanguard’s emerging markets UCITS fund and ETF have a cost of  0.27% and 0.25% respectively. As compared to the US-listed ETF, they are far cheaper, taxes considered.

When investing in funds, there are three levels of taxes to consider:

  1. Portfolio-level: this is tax due by the fund for holding, receiving dividends/income on the underlying securities. This is generally the same for UCITS and non-UCITS funds.

  2. Fund-level: this is tax due by the investor to the fund depending on fund structure. For US-listed ETFs, this is 30% on income and dividends unless your country has a tax treaty with the US, which Singapore and Hong Kong do not. For Ireland UCITS funds and ETFs, this tax rate is zero.

  3. Investor-level: this is dependent on each investor’s individual tax status, typically based on your country of residence. For those of us individual investors in Singapore, this is zero.

At the end of the day,  it may be hard to avoid owning any US-listed securities in your portfolio. The US makes up over 50% of the MSCI All Countries World Index, which is one of the most widely used benchmarks for global equity portfolios. The liquidity and depth of the US market may trump the potentially onerous tax obligations, but there are alternative structures such as UCITS funds and ETFs that you can consider to get the exact same US exposure in a more tax efficient manner.

Tax, if not careful, can shoot low-cost investing in the foot.

You may be forgiven for not knowing about the implications of US withholding tax like so many others, but if some of your hard-earned savings are taken by the US tax authorities without you knowing it, then ignorance is definitely not bliss.

If you enjoyed reading this article from The Know, you can subscribe to our weekly memoFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


Masayoshi Son, SoftBank, and the $100 billion blitz on Sand Hill Road (Bloomberg) 

China and America may be forging a new economic order (The Atlantic)

Is China’s infrastructure boom past its peak? (The Economist)


Don’t take asset allocation advice from billionaires (A Wealth of Common Sense)

Your reaction to big market events depends on whether you lived through it. (Of Dollars And Data)

How the yuan sets the tone in currency markets (The Economist)


Low cost portfolios get you a headstart, says endowus (Business Times)

5 reasons why the world's tech firms are moving to Singapore (Forbes)

Why Facebook bet US$1 billion on Singapore data centre (SCMP)


Mohamed A. El-Erian: Nine lessons from the Global Financial Crisis (Bloomberg)

The LeBron James of short-selling talks Ponzinomics (Institutional Investor)


How to stop being a loser (Freakonomics // 60 mins)

Good to Know

Hong Kong billionaire offers ‘Nobel Prizes’ with double the money (Bloomberg)

The untold stories of Paul McCartney (GQ)

Amazon wants to be in every room of your house (Slate)

A shocking number of killers murder their co-workers (The Atlantic)

Everything you know about obesity is wrong (Huffington Post)

The Nissin instant noodle story: From garden shed to national treasure to outer space (SCMP)

Would perfect memory be a burden or a superpower? (Gizmodo)


Do Crazy Rich Asians only invest in real estate? 

September 14, 2018

Owning real estate has been heralded as the ‘best’ way to grow your wealth. But is it really better than investing in the market? 


Unless you’ve been living in a cave, it’s probably safe to say that even if you haven’t watched Crazy Rich Asians, you’ve heard about it. It’s both a depiction of the life of the 0.1 percent and a marketing coup for the Singapore Tourism Board. The Youngs are absurdly rich, and one of the most opulent symbols of their wealth is the matriarch's family mansion at Tyersall Park. It’s an over-the-top, sprawling home in Peranakan style, and so secluded that it can’t be found on Google Maps.  

Owning real estate, or in this case, a mega-mansion, has always been a status symbol in Asia. It’s heralded as the ‘best’ way to grow your wealth, and if all else fails, it’s a fixed asset and roof over your head. Many of the real ‘Crazy Rich Asians’ have indeed built their fortunes on real estate. But is it really better than investing in the market?

You would think that Hong Kong real estate blew stocks out of the water, but this is a misconception.

We always hear wonderful 'get rich' stories on fabulous property purchases, but looking back at the data, they were more likely just fabulous acts of holding on.

Here are some things to think about when investing in property:

  1. Leverage - This is perhaps the largest driver of outsized equity returns in owning real estate, and also the biggest trigger for the 2008 Global Financial Crisis. If you pay $250,000 for a $1 million property, and the value goes up by 10% ($100,000), you have effectively made a return of 40% on your initial investment (excluding any interest costs etc). It’s quite unlikely you will lever your investment portfolio 4x. Remember, leverage is a double-edged sword that will also amplify your losses in a downturn.

  2. Liquidity - Stocks are far more liquid than real estate investments, and prices are transparent. You can buy or sell stocks anytime during market hours, and you can see the bid/offer spread on your screen. You can list your property for months without any buyers, or perhaps the best ‘offer’ for your property is vastly different from the last transacted price. However, the ease of trading stocks also means that you are more prone to poor behaviour and the whims of your emotions. It’s far easier to sell off your investment portfolio in a panic - all you need is a few clicks. You can’t really sell a property in 5 minutes.

Real estate forces you to behave as a 'good investor' given its frictions. Imagine if you had the same frictions when it came to investing in the stock market?

  1. Diversification - Adding real estate as an asset class to your overall investment portfolio can offer diversification benefits. However, unless you are in fact a Crazy Rich Asian who can afford properties in different cities around the world, it’s difficult to diversify within your real estate investment. For most of us, buying one property will make up the majority of our net worth. It’s much easier to diversify when you invest in stocks - you can buy shares of a globally diversified fund with thousands of holdings with just a small amount of cash.

  1. Income - Both stocks and real estate investments can generate steady income from dividends and rental income respectively. There are different risks involved: dividend payouts are not guaranteed, and the amounts are subject to the underlying company’s discretion. Rental yield is subject to supply and demand dynamics of the real estate market, and there can be periods when your property can’t be rented out at all.

  1. Holding and transaction costs - There is a cost to holding real estate - you have to pay maintenance fees, utility bills, insurance, property taxes and more.  It’s also more hands-on work - you have to deal with leaking aircon units, clogged bathrooms, and pest infestations in the garden. Transaction costs are also much higher for real estate - Singapore property agents on average charge 2%  to broker transactions, and there are additional stamp duty costs.

Investing in real estate should rightfully lead to higher returns because you should be compensated for the illiquidity and transaction costs, but that is not always the case. There was a study done entitled “The Rate of Return on Everything, 1870-2015”, where researchers looked at 16 advanced economies over the past 145 years. They adjusted the returns for inflation, included dividend income for equity returns and rental income for residential real estate returns.  

Source: Bigger Pockets

There are real estate tycoons and stock market tycoons.

Both real estate and publicly traded securities  are better investments than staying in cash, and both have a place in your portfolio and in your life. Owning properties is the Asian dream but there are alternatives to think about before just the diving in.

If you enjoyed reading this article from The Know, you can subscribe to our weekly memoFollow us on LinkedIn or connect with us on Facebook as we bring you financial insights from endowus.
View on


Who is the man taking over as chairman of Asia's biggest company? (SCMP)

Opposites attract: NGOs and money managers unite (The Economist)

Singapore plans new bill to attract more of world's millions (Bloomberg)


We’re living in what may be the most boring bull market ever (Bloomberg)

Warren Buffett's biggest wins and fails (Visual Capitalist)

Do you know how much you're paying when you invest via regular premium insurance plans? (Business Times)


China, Japan are Malaysia's priorities: Anwar. But Singapore? (SCMP)

Singapore orders return of first batch of pilfered 1MDB money (Bloomberg)


How Led Zeppelin came to be (Rolling Stone)


Malcolm Gladwell: Do more choices make us happy? (TED // 12 mins)

Good to Know

Elon Musk’s brain isn’t like yours (Bloomberg)

Japanese, Haitian, and now a Grand Slam winner: Naomi Osaka’s historic journey to the U.S. Open (Washington Post)

China, the birthplace of fake meat (The Economist)

What happened to Fan Bing Bing, China's most famous actress? (NY Times)

Technology is creating an ideal of beauty that literally doesn't exist (The Economist)

Finally, a cure for insomnia? (The Guardian)

JP Morgan is gamifying credit scores (Business Insider)