If Professor Oak introduced Investing

Professor Oak


Hello there! Welcome to the world of Pokemon Investing! My name is Oak! People call me the Investment Prof! This world has many instruments for investing! For some people, they invest to build passive cash flow. Others invest for capital gain. Myself… I study investments as a profession, and I’m here to provide you with a beginner’s guide to investing!

How investments accumulate wealth

There are generally 2 ways you can profit from investments – Capital gain and Dividends.

Capital gain refers to the “Buy Low, Sell High” concept. Dividends refers to cash distributions to shareholders as and when announced. Here’s Meowth to illustrate this.

Meowth explains investing

Let’s say you recently caught a Meowth. As you train Meowth, it grows in levels and becomes of higher level. Also, from time to time, Meowth successfully casts its signature move Pay Day and generates cash for you. Now replace Meowth with the investment you just bought, leveling up represents growth in investment value and capital gain, while Pay Day proceeds represents cash flows and dividends.

These 2 factors combine to increase your wealth.

Choosing a suitable investment vehicle

So you are ready to catch your first investment, but which investment type should you buy? To answer this, there are 2 questions you have to ask yourself:

1) What is your risk appetite?

Risk appetite refers to your willingness and ability to accept volatility in your investment value. It is like choosing a Pokemon. A risk adverse trainer might choose a lovable, nurturing Chansey as your Pokemon, slowly and steadying training it to higher levels with no expectation of explosive growth. A risk taking trainer might choose a volatile Charmander as your Pokemon, which might experience explosive growth when it evolves into a Charizard, but you might get burnt from time to time.

Pokemon Risk Appetite

Similarly, a risk adverse investor will be happy with steady but comparatively lower returns, while a risk taking investor will have to accept more volatile but potentially higher returns.

2) How active do you want to manage your investment portfolio?

This essentially means how much time you wish to spend managing your portfolio. Are you like a Snorlax and would rather Rest than manage your portfolio? Or are you a hard working Magikarp that tirelessly Splashes your way to Gyarados financial freedom?


Based on your answers to those questions, you can choose the investments suitable to your personality.

Investment Options.JPG


As a beginner investor, picking the right investment class to start with is very much like choosing a starting Pokemon. Aligning your risk appetite and involvement with the suitable investment allows you to be comfortable with your investments through thick and thin. Till next time!

Happy Hunting,
KK Professor Oak

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The cost of active fund management

I recently met a friend who was a new investor. He had a pile of spare cash and wanted to generate a return on it. However, he didn’t know where to start and didn’t want to actively manage his investments. As a result, he approached a bank, told the branch manager that “Hey, I have this much of cash, I want to put it all into unit trusts.”

Sounds familiar? I’m pretty sure that’s a situation most people face and end up deciding to do as they want to be “passive investors” and not want to spend time learning to invest. Well today I shall discuss the cost of active fund management (ie giving your money to somebody to manage for you) and why it is prohibitive to long term wealth accumulation.

To my friend if you’re reading, please note that this is not a smackdown on your decision, I’m just seeking to educate others and hopefully, you will reconsider.

Management fees and expense ratios


Let’s imagine you own a orchard. You plant fruit trees/seeds in your orchard, hoping one day they will bear fruit for harvest annually. Let’s say you take the seeds from the fruit and plant them right back into your orchard, to potentially have more trees and a larger harvest the following year.

You face a choice, put your own time and effort to manage the orchard or you can hire a gardener (orcharder?) to manage it on your behalf. Let’s say the gardener wants to be paid in seeds/fruit, which means you have less seeds to be planted back into the garden every year.

My question to you is, which approach will result in a larger orchard 20 years later?

Similar to growing your own orchard, portfolio management has similar traits. Substitute the following terms and you’ll get what I mean:

  1. Orchard – Portfolio
  2. Trees – Investments
  3. Fruits – Dividends / Returns
  4. Gardener – Fund Manager
  5. Seeds for the Gardener – Management fees / Expense ratio

Management fees is the fees charged by the Fund Manager for his services. This is typically a fixed rate annually based on the value of the assets under management. For example, if the management fees is 1%, it means 1% of the value of your investment is deducted and goes to the fund manager’s pockets annually. This happens even if the manager did not make any money for you in the past year.

Another fixed cost is called Expense Ratio of the fund. This cost relates to the operating costs borne by investors including legal fees, administrative costs, utilities, etc for operating the fund. This cost is also charged at a fixed rate annually based on the the value of the assets under management.

Different funds call it differently, some have management fees, some have expense ratio, some have both. In total, the fixed cost of simply investing in funds can range from 1% – 5%. That’s 1 – 5% of your returns gobbled up annually without fail.

Profit for the year? Chomp, 1-5% gone. Loss? Om nom nom, take another 1-5% loss. So scary.

When the power of compounding goes against you

You know what’s more scary? Most people think that “Aiya, its only 1%, just pay them and forget about it”. However, most fail to realise that just like your investment benefits from compounding, expenses and costs do compound too.

To illustrate, here’s a chart of market performance of 6% versus 3 funds with fixed expenses of 1, 3 and 5% respectively over 20 years. It assumes that the funds invest in the same stocks of the index, reinvest gains in the same stocks and start with an initial 10k investment.

Market vs Funds Market vs Funds Summary

As you can see, at the end of 20 years, a few percentage points actual makes a significant difference. The only way a fund is able to beat all of this is by generating returns in excess of (market + fees)%. Unfortunately, this generally does not happen as explained later.

Fund managers are not really remunerated correctly

Another point arising out of our discussion of management fees is that it does not necessarily drive positive behaviour. By pegging management fees to assets under management (AUM), a fund manager may simply seek new investors to boost their AUM, instead of seeking grow the fund through gains, to increase his management fees. He is also secure in the fact that he doesn’t have to deliver great performance to collect his management fee. A counter argument would be that a fund manager would find it difficult to attract new investors or collect increasing fees without good performance. Fair point, but the risk is always there.

Actively managed funds generally under-perform the market

Due to a combination of the above reasons (mainly due to fees), funds find it difficult to beat the market for their investors.

SPIVA is a bi-annual scorecard the Standard and Poor’s publishes that measures the performance of active fund managers against their market benchmarks. As noted in the website, most fund managers (>80% for most markets) under-perform the markets over the long term (3-5 year) time frame. This is mainly due to cost compounding as discussed earlier.

To reinforce this point, Warren Buffett famously won a bet against hedge fund manager Ted Seides in 2017. Buffett had put up USD500k in 2007, saying that a low cost Exchange Traded Fund (ETF) mimicking the performance of the S&P 500 (an index tracking the 500 most valuable companies in the US) will outperform any portfolio of hedge funds over 10 years due to fees. Seides put up the other USD500k and picked a portfolio of hedge funds as part of the bet. The bet turned out to be not even close in Buffett’s favour.

If that’s the case, is active fund management dead?

Obviously not, if not you would see a dearth of fund managers by now. The magic and mystery of hopefully beating the market will always allure investors to “smart money”. My advice to people who are considering unit trusts / funds is this:

  1. Don’t do it. Invest in a low cost (preferably < 0.5% fees) index ETF instead if you want a more cost effective passive investment.
  2. Die die want to buy? Do remember you are paying a high cost for what you’re getting. Also, do your research on the funds you are considering. Factors to consider:
    1. Low Management fees and expense ratio, preferably less than 1.5% total, the lower the better.
    2. Consider the track record of the fund and fund manager, especially during crisis periods like 2009. I believe the true skill of a fund manager is demonstrated during a crisis and not during a bull market.
  3. Do not buy from a financial adviser / bank. You will usually incur a sales charge and they tend to direct you to funds that give them the most commissions. Consider buying online from a site like Fundsupermart where there’s no sales charge. Do note however that there is a platform fee chargeable quarterly for unit trusts, so do factor that into your calculations.

“But wait, that’s a lot of work! I just want to be a passive investor!”

To that I say, there is no such thing. No matter the type of product you invest in, you have to take the requisite time to fully understand what you are getting into. If not, it’s no different from gambling.

Happy Hunting,

PS: As usual, any website or service I suggest is based on my own opinion and I am not paid in any way. For blog matters, email me at risknreturns@gmail.com and I will consider it.

Augmenting your investing life

Last week, I covered how a new investor can use their life experiences to generate investment ideas. Let’s say I was SO INSPIRING that you have implemented it in your life, and now wish to take a more active role in obtaining investment ideas, instead of waiting for ideas to drop from the sky. Fret not, today I’ll be sharing the small tweaks I made to my day to expand the range my investment radar.
Do note that I have a significant US focus, so the tools I use are largely US focused.

That daily long and cramped train ride

Instead of wasting time on mobile games on the MRT, why not spend the time on investment podcasts? For me, I listen to CNBC’s Fast Money and Mad Money podcasts.

Fast Money

Fast Money

Fast Money is a TV talk show on CNBC, a business TV network, that airs daily immediately after the close of the US market. CNBC takes the show’s audio and turns it into a audio podcast available on iTunes for free. CNBC does not seem to officially support Android, but I’m sure you can find it on some Android podcast apps. The podcast is uploaded on iTunes daily at roughly 7.30 am or 8.30 am SGT, depending on whether Daylight Saving is active.

Fast Money is hosted by Melissa Lee and a panel of 4 rotating full time traders, most of whom run their own funds. They share their stock picks and trading ideas daily, as well as give their opinions on the day’s news and headlines. The discussion is usually more trading focused and not necessarily for long term investors. They also discuss more than just equities, with options and recently cryptocurrencies featuring on the show as well.

I listen to this podcast to get a pulse of the thoughts of the traders to look for short term mis-pricing caused by trading as well as maybe get a few trading ideas. Ideal for the US investor as it is very much US focused.

Mad Money

Mad Money

Mad Money is also another TV talk show on CNBC that airs immediately after Fast Money daily. It is hosted by effervescent business TV veteran Jim Cramer. Dubbed as “the Most Interactive show on Television” by Cramer, he livens up the show with his signature soundboard. For a sample of his work, take a look:

(I hear Stark Industries has since delisted from the NASDAQ)

I’ve watched and listened to Mad Money almost everyday since the first day I started investing back in 2013. He explains things with a retail investor in mind and gives recommendations from a mid-long term investment perspective, while doing it in a hilarious and over the top way where possible. He is also able to attract top CEOs on to his show for interviews (most notably Tim Cook from Apple), so it also enables the listener to hear directly from management. He simplifies investing and makes it fun, making it ideal for the newbie investor.

Mad Money is available on iTunes daily from 8.30 or 9.30 am SGT daily.

To track my portfolio from time to time

You’re tired of work, you’re bored, and you just want to see how you are doing on the market. For me, I use Yahoo! Finance and more recently, StocksCafe to track my portfolio.

Yahoo! Finance

Yahoo Portfolio

I’ve been using Yahoo! Finance portfolios since I first started investing to show me a live status of my portfolio. All you need to do is sign up for a Yahoo! account, create a new portfolio, and input all your stock purchases into the portfolio and Yahoo will calculate your gains/losses automatically, which will also update automatically as the trading price changes. Do expect a 20 mins delay in price data for most markets except for the US market.


  1. Simple and free to use
  2. Extensive library of stocks to track


  1. Only able to track performance of your current holdings and doesn’t track your historical performance on positions that you have closed out. As such you cannot track your own portfolio performance over time.

Yahoo! Finance portfolios can be found here.



StocksCafe was initially created by a user who wanted to easily track and screen stocks for his own personal consumption. Now it is open to all who wish to use it for free, with people who donate to the site getting enhanced features.

I recently stumbled upon this site and have started using it to track my own portfolio. I’m currently using the free version, which i think is sufficient for now. If you start recording transactions from scratch, you will be able to easily track your XIRR, dividend income and relative performance to STI ETF. It even has a tool for expected dividends for current and future years. For portfolio junkies, it automatically computes your portfolio beta, Value at Risk (VaR) and expected shortfall and based on that information, even give you recommendations on stuff to buy to balance out the portfolio. StocksCafe also has a decent community of people sharing ideas and their own portfolios. Pretty cool stuff.


  1. Automatically computes XIRR and shows relative performance to STI ETF
  2. Automatically tracks your dividend income and include it in the XIRR computation
  3. Some other cool automatic tracking and recommendation functions.


  1. Currently only tracks SG, MY, US and HK stocks.
  2. Free users are limited to 30 transactions so can be prohibitive for frequent traders. I say try it out and decide if you are want to contribute.

StocksCafe is found here.

Weekday evening entertainment

With so many things competing for your attention, I usually devote about 1 hour of my evening daily to investment websites. I love reading news, blogs and research reports for ideas. For business news, I frequent CNBC as I prefer their style of reporting (more to the point I suppose) compared to Bloomberg. But of course feel free to follow any of the business news sites like CNBC, Bloomberg, Reuters, etc, for your news fix. Reading also familiarises you with Wall Street jargon and things that investors look out for in each industry.

For blogs, you can refer to my blog roll (on the side bar over there ->) for a list of blogs I follow frequently. They are fellow Singaporeans who are also on their own journey to financial freedom and they cover a range of topics in personal finance and investing. As such, they have a Singapore market focus and slant, which is great as I’m looking to move more into the Singapore market. I’m discovering more and more blogs as time goes by, so do regularly check my blogroll for an updated list.

Research reports from brokers can be a useful way to derive ideas to understand the companies that are currently on the radar of big investors. They can give a comprehensive analysis of each individual stock and their thesis on why the stock price should increase. I currently only have 1 broker that provides me with free research (DBS Vickers), so I visit their platform daily to read about their latest ideas. Do note that research reports tend to be biased so do not take them to be gospel.


By making small commitments and tweaks to your daily routine, you can expand the range of your investment radar and get more investment ideas. However, do remember that while these sources are informative and helpful, they are usually motivated by the sources themselves. Nothing beats doing your own homework and making up your own mind prior to investing. Blindly investing on someone’s recommendation (including a recommendation from me) is simply gambling.

Happy Hunting,

PS. The podcasts, tools and websites specified above are tools that I use everyday and I’m in no way sponsored by them. The views I have are purely my own.

Investing as a way of life

Friends often ask me where I get my stock ideas, what kind of work I do to find ideas and most often, they don’t know what stocks to buy.

To be honest, I think I’m one of the most lazy investors out there (Please don’t bash me?). I read pages and pages of others’ blog posts about how they have projected Company X’s future profits and cashflows based on assumptions A, B and C and then discounted back to current value, the price should be $Y.YY and the stock should be bought. Or how the 20, 50 and 200 day moving averages is forming a golden cross, further confirmed by the RSI and MACD indicators and based on fibonacci ratios they expect Company Y’s stock price to move to $Z.ZZ and meet resistance at $D.DD.

I look at all of this and I yawn like this cat.


Don’t get me wrong, doing in-depth homework to form your own thesis on your stock picks instills discipline and takes luck mostly out of the equation. You live and die (mostly) by your analysis and based on your analysis, you can find the price for your disciplined entry and exit.

However, for the new or lazy (like me) investor, this takes a lot of work and it can be overwhelming. You’ve got your day job to worry about, your girl/boyfriend, spouse, family, parents, in-laws and friends to entertain, that Netflix show you want to catch or that video game you want to beat (Assassin’s Creed Origins – 76 hours and counting). Ain’t nobody got time for that right?

Make it a way of life

When I first started investing, I generated stock ideas by making investing a way of life, and not something you go out of your way to find and do.

What that entails is simple, you go about your day as per normal and do the things that you love. Just be aware about investment opportunities as you go about your day.

Let’s go through an example to illustrate what I mean. You grab your daily coffee from Starbucks, go to work at your employer (insert listed company here). During lunch time, your colleagues decide to settle on McDonald’s when you see a long queue at Domino’s Pizza (Probably doesn’t happen but hey, just go with it ok?). It’s 6pm and your Apple Iphone vibrates with notifications from Whatsapp. It’s your friend asking you to look at this video on Youtube about a turtle doing godknowswhat with a CrocYou return home bored, so you fire up your Sony Playstation 4 to play Electronic Arts’ Star Wars Battlefront 2.

In the above example, you would have encountered at least 9 different products/services produced by 9 different companies. And that’s just from your own day. By talking to your friends/colleagues/family/random people, they might mention a new movie they’re anticipating, a new service they found useful, an app they found ultra cool. All you need to do is think about who makes these things daily. Do you love their products? Are they indispensable to you? Is there great demand for their products and services?

That is how an investment idea is born for me most of the time. My US portfolio is littered with such examples:

  1. Google – We use it all the time, Search, Gmail, Youtube, the list goes on.
  2. Facebook – The pre-eminent social network we all use.
  3. Disney – I love their content as described here.
  4. Apple – I’ve used their Iphones since Iphone 4. I own a Apple Watch Series 2 as well.
  5. Domino’s Pizza – They have the best pizza among all the pizza chains imo.
  6. Tencent – My interactions with the Chinese convinced me of their influence here.

Warren Buffett is very much a proponent of this style of investing, with his investment in Coca-Cola all those years ago very much related to the fact he consumes about 5 Cokes a day.

Berkshire Hathaway Annual Meeting

Of course investing simply because you love the product is not the most disciplined way of investing. I still do a limited amount of homework on the companies, reading their annual reports and reading up on their business model before ultimately investing. Nothing too fancy like Discounted Cash Flows or deep dive Technical Analysis. Invest in good companies and all the fancy numbers don’t really matter in the long term.

Benefits of this approach

1) Investing this way makes investing fun, interactive and easy to pick up! It keeps you emotionally engaged and interested in your investments, thus making the following of each company’s news less of a chore. I always look forward to watching Apple’s keynote addresses and watching the latest Disney movies as a part of me knows that I’m contributing a tiny bit (ok nano-sized bit) back to their earnings and my investment.

2) Wall Street doesn’t necessarily have a monopoly on ideas. They are not really in touch with the common man sometimes. A few years back, I saw and loved a segment on CNBC about Lionsgate Entertainment, as it was an excellent example of this approach.


(Courtesy: Yahoo! Finance)

Lionsgate Entertainment was a struggling movie production company back in 2009 when they acquired the movie license for the future blockbuster The Hunger Games. As you can see above, Wall Street scoffed at this deal and paid no attention. Every book of The Hunger Games series were already New York Times Best sellers by the time the first movie was released. If you loved the books, it made sense for you to invest then to bet on the success and popularity of  the movie. That was what some of the CNBC viewers did and bagged a close to 400% gain over about 4-5 years.

Downsides of this approach

1) It may keep you attached to under performing companies which should be sold as soon as possible. Always remember that nothing is forever, technology can easily make the product you love so much obsolete in a flash.

2) You are less likely to be able to identify an undervalued company from industries that are B2B (Business to Business) as people usually interact with companies that are B2C (Business to Consumer).


Finding ideas for investing can be simple if you put your mind to it. New investors can consider looking at their daily interactions for ideas and inspiration to look into. Just do your personal due diligence before investing and you should be fine.

Do you have a unique way of generating stock ideas? Do let me know!

Happy Hunting,