Ntu 2010 Presentation (Tnfm)

Practical Investing

Investing to make a billion!

Investing to make a billion! Warren E. Buffett US$1,000 invested with Buffett in 1956

was worth about US$30.6 million at the end of 2007!

~28% compounded annually versus 10.4% for S&P 500

2nd richest person on Forbes 2009 list (US$37 billion net worth)

Epitomised “value investing”, also bought “great” businesses with “wide moats”

Favourite holding period - “forever”


Investing to make a billion! George Soros “Man who broke the Bank of England” US$1,000 invested with Soros in 1969

was worth about US$2.15 million at the end of 1995!

~34% compounded annually versus 11.7% for S&P 500

In 1992, made US$1.8 billion by shorting British Pound and buying German marks

29th richest person on Forbes 2009 list (US$13 billion net worth)

Epitomised “betting the farm”, willingness to place huge bets in employing a global macro strategy

“We start with the assumption that the stock market is always wrong”


Investing to make a billion! John Paulson President of Paulson & Co hedge

fund Made US$20 billion for his firm in

the recent crisis Credit Opportunities Fund rose

589.6% in 2007 Bet against US housing market,

financial stocks Net worth approximated at US$6.8

billion


Many ways to invest successfully Not one single “magic formula” Successful managers had a “game plan”, but

adapted it to changing conditions At the end of the day, the investment returns

speak of success or failure Also an “art”, rather than merely a “science”

Formulate Your “Game Plan”

You need to decide your own investment strategy

Continually review and revamp the strategy if necessary

Mistakes are common, but are often the best learning opportunities

Agenda Equities Investing – Not as easy as it seems The investment universe Introduction to unit trust FSM approach to construction of portfolios Questions & Answers

Equities Investing Benjamin Graham (Security Analysis, Intelligent Investor)

Two Rules of Investing1) Don’t lose money2) Don’t forget rule 1

Philip A. Fisher (Common Stocks and Uncommon Profits)- 15 Points to look for in a common stock- Scuttlebutt

John Burr Williams (The Theory of Investment Value)– Dividend discount model

Equities Investing – Can do Quantitative analysis

– Ratios analysis: P/E, Du-Pont, P/B etc– Deriving intrinsic value : DDM and others

Equities Investing – Harder to Do Qualitative Analysis "Fifteen Points to Look for in a Common Stock"

• Does the company have a worthwhile profit margin?

• What is the company doing to maintain or improve profit margins?

• Does the company have outstanding labor and personnel relations?

Scuttlebutt – Networking Technique– Most people love to talk about their competitors. Go to key

managers in five different companies in an industry and ask each of them questions about the other four. You will emerge with a detailed and accurate picture of all five companies

– Other sources include vendors, customers, professors, trade association executives, former target company employees, and so on.

Why Stock Analysis is so difficult

Fibrechem TechnologiesThis was one of the best-followed S-chips. The first sign of trouble surfaced when the China-based chemical fibre-maker requested a trading halt on Feb 23 this year. That was the day it failed to release, as scheduled, its fourth-quarter and full-year results.

To the dismay of shareholders, the firm's auditors indicated they had difficulty finalising the audit on its trade receivables and cash balances as of the end of December last year.

Before the trading halt was imposed, the counter plunged seven cents, or 40 per cent, to 10.5 cents, with 9.68 million shares traded.Meanwhile, founder and chief executive James Zhang resigned from his position as executive chairman.

The company has appointed NTan Corporate Advisory as its independent investigator to examine the questionable transactions. No progress has been announced.

“S-chipped”-Tue, Mar 31, 2009The Straits Times

Even if you are good at picking stocksStraits Times Index Components % Change in 2008

SMRT Corp Ltd 0.0%

ComfortDelgro Corp Ltd -17.1%

Singapore Press Holdings Ltd -28.2%

StarHub Ltd -31.2%

Jardine Matheson Holdings Ltd -32.5%

Singapore Technologies Engineering Ltd -33.8%

Jardine Strategic Holdings Ltd -33.9%

Singapore Airlines Ltd -34.2%

Genting Singapore PLC -34.3%

United Overseas Bank Ltd -34.5%

Singapore Government Bonds 7.40%

Bond Funds in 2008

Table 1: Top 10 Funds in 2008

Fund NamePerform

anceRegion/Asset

ClassUOB United Global Bond SGD 8.90% Global Fixed Income

Henderson Global Bond Fund 8.50% Global Fixed Income

Legg Mason Global Bond Trust 4.70% Global Fixed Income

PIMCO Total Return Bond USD 3.50% US Centric Fixed Income

LionGlobal Spore Fixed Inc-A 2.20% Singapore Fixed Income

PRU Protected Global Titans Fund 2.10% Global Protected

LionGlobal SGD Money Market 1.60% Singapore Money Market

Phillip Money Market 1.40% Singapore Money Market

DWS Lion Bond Cl A 1.40% Singapore Fixed Income

Cash Fund 1.20% Singapore Money Market

Source: iFast Financial Compilations; performance in the tables are in SGD terms, calculated using bid-to-bid prices, with any income or dividend reinvested

Your Universe

The Investment Universe

SG Stocks

Small Caps Mid Caps

Blue Chips Penny Stocks

Cash

Savings Account

Structured Deposits Fixed Deposits

Fixed Income

Corporate Inflation-linked Bond

Sovereign Bond Assets-backed Bond

Derivatives

Forwards Futures

Foreign Exchange Options

Where can I place my money

in?

Unit Trust

The Universe of Investments is Large Global stocks: Singapore, US, Europe, Australia, Asia ex Japan,

Latin America, Eastern Europe, Middle East, North Africa etc…

Fixed Income: Developed government bonds, corporate bonds (investment grade and non investment grade), emerging markets, Treasury Inflation Protected Securities, convertibles

Commodities: Equities of resource companies or direct holdings through futures.

Alternatives: Various hedge fund strategies e.g long/short, currencies etc

Types of Unit TrustsCash Fixed Income Equities Alternatives

Money Market Fund

SG Bonds Global Bonds Asian Bonds Emerging Markets Bonds High Yield Bonds Investment Grade Corporate Bonds Non-Investment Grade Corporate Bonds

Global Regional Single Country Sectors

Strategies Currencies Futures

Pros & Cons of Unit Trusts Pros

– Instant diversification– Economies of scale– Access to otherwise not accessible market– Professional management– Smaller start up capital required– Require less time & effort compared to stock selection

Cons– Limited control– Recurring fees (annual expense ratio)– Slightly lower liquidity

As good as individual stocks (maybe even better!)

The benefits of active management

Exposure to “legendary” fund managers

Why limit investments to equities?

Why limit investments to equities?

Common portfolio mistakes Investment concentration by choice Unintentional investment concentration Losing faith and lacking persistency Failure to rebalance

FSM portfolio construction1. Decide your objective and risk profile, which

determines the allocation between equities and bonds.

2. Allocation within equities portion and bonds portion of the portfolio

3. Fund selection to gain exposure to determined regions and asset classes

Decide objective and risk profile A well diversified portfolio should contain

Equities – for seeking returns Bonds – as return stabilizer (can also seek returns)

Vary allocation to equities and bonds according to risk (high risk, higher equities allocation)

Returns should then be scaled proportionately

Conservative Moderately Conservative

Balanced Moderately Aggressive

Aggressive

Underweight 100% Bonds0% Equities

80% Bonds20% Equities




Neutral 90% Bonds10% Equities





Overweight 80% Bonds20% Equities





Bonds and equities portfolio Further allocation of bonds and equities to gain

access to require asset classes

Bonds Portfolio Equities PortfolioSingapore / SGD Bias Bond 30.0% US Centric Funds 25.0%

Global Bond Funds 20.0% Developed Europe Funds 25.0%

Asian Bond Funds 20.0% Japan Funds 5.0%

Emerging Market Debt Funds 15.0% Asia ex Japan Funds 15.0%

High Yield Bond Funds 15.0% Global Emerging Market Funds 30.0%

Fund selection Quantitative performance indicators

– Performance consistency– Performance comparison (against benchmark)– Track record

Qualitative assessment– Management strengths, weaknesses– Investment philosophy– On-the-ground knowledge, research resources

Fees– Annual expense ratio– Performance fee– Front end load– Back end load

Key Takeaways In practise, doing well in equities investment

is not easy for a retail investor

Unit Trusts is a viable alternative that captures a larger set of investment universe

Create and continuously improve your own investment strategy

DisclaimerThis presentation is prepared by iFAST and the opinions expressed herein are subjected to change without notice. iFAST and/or its licensed financial adviser representatives may own or have positions in the funds of any of the asset management firms or fund houses mentioned or referred to in the presentation, or any unit trusts or Singapore Government Securities bonds related thereto, and may from time to time add or dispose of, or may be materially interested in any such unit trusts or Singapore Government Securities bonds. This presentation is not to be construed as an offer or solicitation for the subscription, purchase or sale of any funds. Investors may wish to seek advice from a financial adviser before purchasing units of any funds. In the event that an investor chooses not to seek advice from a financial adviser, he/she should consider whether the product in question is suitable for himself/ herself. No investment decision should be taken without first viewing a fund's prospectus. Any advice herein is made without any regard to the specific investment objectives, financial situation and particular needs of any specific person or group of persons. Past performance and any economic and market trends or forecast are not necessarily indicative of the future or likely performance of the funds or the manager. The value of units in any funds, and any income accruing to the units from any funds may fall as well as rise.

Please see our website for further information.

Questions & Answers

Technology

Ntu 2010 Presentation (Tnfm)