5 things Singaporean investors should be thankful for this National Day


National Day has always been a time of patriotic celebration. For me, it tends to be patriotic reflection. This has been made more pronounced with my work travels over the past 1 and half years. Sitting here alone chilling in my Beijing hotel room having worked through yet another National Day overseas, I thought I’ll share my top 5 things I feel Singaporean investors should be thankful for this National Day.

1) Income tax regime

The best part of being a Singaporean investor is the relatively low income taxes as well as no taxes on dividends and capital gains. Taxes on employment and investment income directly affect your ability to accumulate wealth as it acts as an additional cost. Having experienced the benefits of Singapore’s income tax system, I can’t imagine living in a system that taxes you over 40% of income and having to pay taxes whenever I receive dividends or sell my investments.

What’s more, I’ve seen tax systems in China and India that are so complex and with high tax rates. Only with a tax system so simple and intuitive like Singapore’s will you be able to e-file your taxes on your own.

2) CPF

CPF can be a contentious issue among Singaporeans. To me, having a family member who YOLOs all his life, I see the need for the forced savings of CPF. What’s more, it’s not like they are paying you peanuts for holding your cash, with guaranteed 2.5-5% interest across your various accounts. Yes, CPF has its flaws, but its current incarnation to me provides the necessary basic layer of retirement safety for most Singaporeans, without encouraging the crutch mentality of pension systems. I’ve yet to find a better designed retirement system to date.

3) Wealth of investment options available

This may seem pretty obvious, but the countries I’ve visited sometimes struggle to have the same level of investment options available to their citizens. Ask the Chinese what a REIT is, and they’ll tell you it is a scam to swindle investors’ money on the premise of pooling funds to invest in real estate. Add to that the controls over capital outflows and you essentially can only buy stocks from the Chinese casino stock market, unless you are super rich.

Also, let’s not talk about countries with hyper inflationary economies like Venezuela and Zimbabwe or poor countries where investment options don’t really exist.

4) High level of security and low risk of disaster

This factor to me is often overlooked and taken for granted. Imagine owning a REIT with Singapore properties and every other year Singapore is hit by a tsunami or earthquake. Or owning a Singapore-based factory with constant civil unrest and strikes. The relative political and financial stability gives rise to the possibility of stable assets to invest in, and for Singaporeans to prosper.

5) SDIC’s Deposit Insurance Scheme

Another often overlooked factor. This deposit insurance is essentially the Singapore government insuring up to $50k of your bank deposits in each Singapore based bank. With ironclad AAA-rated reserves, this insurance is almost guaranteed to pay out in bank disaster scenarios. Given Singaporeans love of fixed deposits and high interest savings accounts as a form of investment, this is most welcome.


Singapore is one of the most investor friendly countries in the world, and the world has noticed. With many famous names and investors choosing to come to invest and start wealth management firms and funds here, we as Singaporeans should utilise our birthright to its fullest extent.

To all my Singaporean readers, Happy National Day! #WeAreSingapore

Happy Hunting,

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“Save 100k by 30” goal review

Whenever you reach a milestone in life, you tend to reflect on what has been and sometimes, what could have been. As I celebrate the 5th anniversary of joining the workforce yesterday and my 30th birthday today, I am reminded of a goal I once had but have not tracked for a long time.

Back in July 2013, as a young fresh graduate about to embark on my career as a legal sweatshop worker auditor at a mid sized audit firm, I read an article in the Sunday Times entitled “Is it possible to have $100k by 30?“. Author Jonathan Kwok surmised that as a 25 year old male fresh graduate, if you earned the median salary of $3,050 per month, had 3 months bonus (AWS + 2 months variable bonus), had a 4.5% annual pay rise, saved 50% of your salary, you would have managed to accumulate $123,000 of pure savings (excluding CPF contributions). If you choose to invest 60% of the savings and obtain a 6% return per annum, the average 10 year year return of the STI then, that amount will be $134,000.

Back then, upon reading this, I thought to myself…

Challenge Accepted

5 years on, if you simply look at my portfolio value, you would see that I’ve already achieved that goal with some time to spare. The exact time I achieved the $100k goal was approximately slightly before my 29th birthday, 1 year ahead of schedule. In fact, my current tally is quite close to Jonathan’s estimates.

Reliving my 5 year mission

Let’s examine how I did it with a trip down memory lane.

Tough start

When you study among so many brilliant individuals throughout your education years, there comes a certain basic expectation that there is a set path that you must follow to career success. However, when you can’t even get on that path to begin with, you sometimes feel like a failure, especially when you see your peers start to outpace you in terms of opportunities and salary growth.

I’ve made peace with myself on this, but to date I still face a uphill battle as a result as my salary was by some measures much lousier than Jonathan’s assumptions:

Starting point

*My bonuses were never more than 1 month, some years were less than that.

I was starting off a giant back foot, with my only redeeming factor being auditors’ comparatively large annual increments. To this day I’m still lagging behind Jonathan’s salary assumptions. With that said, I can’t complain too much as I know there are people out there who start from even further behind, with student loans and large parental support contributions monthly.

Leading a simple and frugal lifestyle

I have relatively simple tastes, I am a bit like what some would call a 宅男 (Nerd / Otaku), the most important things I possess is my computer, mobile phone and Nintendo Switch. Netflix / Youtube / Video Games with the odd movie at the cinema being my entertainment, analysing business news stories and financial reports my interests. The only time I go to restaurants are with close friends whom I catch up with every few months or colleagues, my family innately prefer hawker centres. No girlfriend either so no expenses there as well.

As a auditor in a firm previously, leave was mainly used for professional exams, there was little time for overseas trips. In fact, since starting work, I’ve never taken leave to go on a leisure trip overseas.

Zero in 5 yearsPogchamp

I can imagine the horror that is going through your minds now. While I love the idea of travelling for leisure, I hate spending tons of money on it. Also, I feel that if I were to go on trips, I feel it is more meaningful if it were with friends or family. As a single introvert, my attached friends don’t really ask me to join them on their trips. This was partly why I took my current job in the hospitality industry, as it afforded me a chance to travel and have a first hand look at how business is done overseas.

Saving and investing half my take home pay

This low cost lifestyle enabled me to consistently save half my take home pay. I’ve also been rather aggressive with my savings, investing at least 80-90% into the US market at first, with my portfolio now more weighted towards the SG market. How I rationalise this approach is through the fact that I’m young and can afford to take the risk. I also have low expenses and in the event I’m screwed over by Mr. Market and/or retrenched by my employer, I take comfort in the fact that my parents will take care of me.

I know its considered a bit reckless by finance advisors, but I really frown on holding too much cash. Also, I would argue that if you know what you’re doing, focus on buying quality stocks and take a long term view, the risk of being wiped out by the market is relatively low. You might suffer massive draw downs in your investing journey, but quality companies always have the ability to bounce back.

Being lucky with my investments

I try as far as possible to be right with my stock picks based on fundamentals, but ultimately the market has a large say in whether you are right or wrong. I’m lucky to say I’ve managed to achieve an XIRR of 16.57% p.a. (according to Stocks.Cafe) to date since 2013 or 15.22% between 2013 – 2017, well outperforming the 6% assumption Jonathan had. This helped me make up for the salary gap I have and am still facing.

Financial goals on track, life goals still lacking?

Some of you might be looking at all of this in “disgust”, saying that I do not have a life. “Why don’t you live it up a little?”. In a way, I would somewhat agree with you. While I like the finer things in life, I am content with my nerdy and simple lifestyle. The only true failing I have is that I’ve yet to find a partner in crime in my journey to financial freedom, probably due to my 宅男ness. I’m reminded of it from time to time by my mom, as all mothers do. I’m open to being single forever if that is path given to me, but that sometimes sounds too lonely.

Will I be anointed a 铁公鸡” (stingy person) like AK in 10-20 years? Haha I certainly hope not.

What next?

I hope my story will be an inspiration (nightmare?) to the fresh graduates of 2018 as their embark of their careers, as a Sunday Times article once did for me. Financial freedom can be planned and achieved if we take pro-active, positive steps towards achieving those goals.

As for me, let’s set a new 5 year goal:

Save 350k by 35

Watch this space.

Happy Birthday to me,

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Is it responsible to have many kids?

Random family

Over the weekend, Channel NewsAsia published an article on the Hengs – a family with 7 kids and living on less than $3,000 per month. The article’s comments section largely revolved around the view that having that many children, and still wanting to have more if he were to do it again, was a irresponsible thing to do.

The debate intrigued me. As a topic vaguely related to personal finance, I thought I’ll examine the topic here, through the various lenses of Financial Responsibility, Social Responsibility and Family Responsibility.

1) Financial Responsibility

This aspect is the most clear cut facet of the debate. The more children you have, the more income you should have to adequately support your large family.

For the Hengs, for a take home pay of $2,500, that works out to $278 per capita per month. Even with external help, it works out to $333 per capita per month, based on their $3,000 of monthly expenses. Being able to live off of that as a family is most impressive.

Depending on your perspective, one could view it as most irresponsible financially as every person has had to make sacrifices in expenditure in order to maintain that level of expenditure. On the flip side, you could say that they were being responsible financially by living within their means.

For me, as a strong believer in self sufficiency, I feel the biggest problem is that they are essentially living paycheck to paycheck, with no savings / emergency funds / retirement for the parents. If something were to happen to Mr Heng, the family would have problems. If that doesn’t happen, Mr and Mrs Heng essentially have to rely on their children for survive in retirement. Asian values may encourage the children to support their parents, but that is not guaranteed.

2) Social Responsibility

This aspect is far more uncertain. If you are unable to support your family to a sufficient level, is it responsible for you to rely on charity or government support to raise your family?

The believer in self sufficiency in me once again rejects this concept. Why should you create a problem, once you can’t solve it, pile it onto others? No doubt this way of thinking is applicable to most problems people create for society.

That is until my father brought up the “National Service” aspect of the issue. Everyone knows how Singaporeans are simply not having enough children to replace themselves. GE 2011 also showed that we do not wish to have excessive immigration as a way to solve this problem. As such, shouldn’t we support those who embrace the “duty” of having more children even if they do not have the means? Isn’t it in the nation’s interest to ensure the success of such families?

3) Family Responsibility

This aspect refers to the strain on the constituent members of the family. Is it responsible to the members of the family to add further burden by having more children?

The strain on the Hengs is very much evident in the article. How Mrs Heng is overworked, having to cover all the aspects of the children’s lives alone. How Mr Heng and his eldest daughter Samantha have drifted apart. How 2nd daughter Rachael has had to take up the mantle of mother and peacekeeper. How Mr and Mrs Heng feel guilty about various aspects of their children’s rapid growth.

Every family will face different types of strain and problems. One might argue that growing up in challenging circumstances could give the children a strong and independent mindset, while growing up in a carefree environment can create a sense of entitlement. Another might argue the emotional strain will adversely influence the children’s perception of family and life.

Ultimately, every person and child responds to their upbringing in a different way. There is no way to judge the effects of this aspect definitively either way.

A Parent’s Ultimate Responsibility

Based on the 3 facets of responsibility, it is safe to say that it is financially irresponsible to have a large family if you can’t afford it, with the other 2 aspects a wash. At this point, we should consider a parent’s ultimate responsibility – to ensure that they raise good and useful members of society. If a parent wholeheartedly wishes to achieve that goal, like the Hengs, we as a society / nation should be supportive of that goal, even if it is financially strenuous. Especially in a time where we need more local Singaporeans.

What we don’t want is irresponsible parents maintaining a large broken family that only adds to societal problems. How charities / the Government are able to differentiate between the 2 is beyond me though.

Happy Hunting,

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Scuttlebutt Report: Tianjin Eco City Visit

Regular followers of my portfolio would know that I am vested in Keppel Corp since the oil crash of 2015. I have divested some this year, but it still remains a part of my portfolio. The general perception of Keppel Corp is that it is mainly a company that constructs oil rigs and is highly correlated to the fate of the oil industry. Less is talked about its property or infrastructure division. And for good reason, as traditionally it’s a main driver of net profit.

Revenue breakdown

Net Profit breakdown

Source: Keppel Corporation Annual Report 2017

With the decline in O&M profits, Property and infrastructure will need to pick up the slack in the meantime.

Having attended this year’s AGM and read the annual report, Board Chairman Lee Boon Yang and CEO Loh Chin Hua seemed to signal a move towards more diversified streams of revenue. CEO Loh even mentioned that he hoped that the company’s shares will be “re-rated” given this new approach. This is evident in the theme of this year’s Annual Report: Solutions for Sustainable Urbanisation

Essentially, the direction revolves around Keppel Urban Solutions, the platform launched in 2017 to bring together Keppel’s various capabilities in property and infrastructure, marrying it with internal and external funds (through Keppel Capital) to design and manage smart sustainable cities of the future. The unwitting poster child of this approach is the Sino-Singapore Tianjin Eco City (SSTEC), a city designed and built from scratch on non-arable land as a collaboration between the Singapore and China governments, with Keppel Corp playing the leadership role in the Singapore half of the joint venture.

With Keppel Corp securing another project to develop Saigon Sports City in Ho Chi Minh City, coupled with the prospect of spending 2 weeks in Tianjin (which is not known as a tourist destination) for a work trip, it seemed like a productive use of my time to check out SSTEC to see if it is viable.


Tianjin map - with annotations

Above is a map of Tianjin municipality, to give you a rough idea of where the significant locations of Tianjin are located. Tianjin New Binhai Area is a Special Economic Zone intended to replicate the development seen in Shanghai Pudong and Shenzhen. The majority of the New Binhai area appears to be for industrial use at the moment, with some MNCs setting up shop here. The area’s Yujiapu financial district is still under construction. SSTEC is a sub-district of the New Binhai area.

SSTEC is a roughly 1 hour drive from the downtown area and 40 minute drive from the airport. There are roughly 80,000 people living in the city currently according to statistics.

The Journey

The journey by car from the Tianjin downtown area (where I was staying) took over 1 hour. Here are some pictures of the road to SSTEC to give you an idea of the surroundings:

The City

This aerial shot will help you understand the scale of the project:

Tianjin Eco City - Aerial view

Source: Tianjin Eco City website

Here are some street level shots I took:


As you can see, the vast majority of the buildings up are for residential use. There are some amenities already up like schools and neighbourhood malls. The city was not really bustling with activity at the time (early afternoon), probably because the people living there are at work in surrounding industrial district. I visited some of the local showrooms to get a better idea of the future developments of the city. Here’s the showroom for Shimao Property, a China property developer listed in Shanghai, which accounts for most of the residential properties you see in the earlier pictures:

Shimao Map

Another representation of where SSTEC is located


I also wondered around the science and technology district and came across a familiar logo:


Keppel Land also had a showroom for some residential developments they have in the area. According the sales persons, they are priced at RMB1,500 per sqm, set to complete in 2020 and with only 15-20% of units remaining available.


As seen in the map shown, Keppel’s residential units are pretty well located with nearby amenities and close to the bridge that connects to the surround industrial developments and the expressway to the city. There is also a lake district nearby.

I left the city late afternoon, flanked by flags and wind turbines.


My thoughts

Singapore is renown around the world as a garden city, to see that same vision realised in a foreign country under our guidance brings me a deep sense of pride as a Singaporean, just like how we managed to hold the Trump-Kim summit. From a business standpoint, it makes sense to sell that vision and expertise especially to developing countries who wish to do it right and not succumb to excessive pollution. Keppel is uniquely positioned to be able to execute with its track record and in house property and infrastructure divisions.

As for SSTEC, it is currently situated in a pretty bad location with the CBD and Airport about 1 hour away. There are also limited things you can do nearby. However, with further development on its way with more industries setting up shop in the Binhai area and the eventual completion of the Yujiapu financial district, the land bank and developments Keppel has in SSTEC will appreciate over time.

Overall, I like the direction Keppel is taking and will look closely at the development of SSTEC, Saigon Sports City and other potential future deals that could represent significant upside.


Here are some of my favourite photos of the Tianjin downtown area:


Sunset on the Tianjin Eye

Happy Hunting,

Disclosure: I’m invested in Keppel Corporation and this is not a sponsored post. The views here are my own
Disclaimer: The information presented does not constitute a call to buy or sell shares. It is for general information purposes only. Do your own due diligence before making a decision, friends.

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Malaysia Boleh, Malaysia stocks Tak Boleh?

In the wake of the tsunami that swept the Malaysian opposition alliance Pakatan Harapan and Dr Mahathir to power, the iShares MSCI Malaysia ETF promptly tanked 6% in US trading to close near to its 1 year low.


Source: Yahoo Finance

The investor in me started to click into gear. Putting aside all the political rancor and name calling, what does this earth shattering election mean for Malaysia businesses and equities? Is it time to buy?

Personally, I usually don’t follow Malaysian politics too closely, but here are some of my initial ignorant thoughts / ramblings.

What Mahathir and Anwar stand for

Throughout the 11 day campaigning process, there has been little discussion on economic policy except for a few stated populist measures (which I will cover later). As such, I could only form my opinion based on their past terms in office more than 15 years ago, when they were part of UMNO.

During his time as PM, Dr Mahathir was a renown as a strongman and the epitomy of Malaysia’s brand of race-based politics. As a child of the late 80s and 90s, I always remembered Mahathir’s inflammatory statements towards non-Malays and foreigners, in particular Singapore. He was also a protectionist, backing favourable policies to the Bumiputras while sidelining non Malays. Under his care, Malaysia felt inefficient and not as business friendly.

That said, Mahathir has struck a more conciliatory tone in his comments since the election. Can a leopard change its spots? Or is this simply a facade? Only time will tell.

In contrast, Anwar seems to be more progressive and inclusive based on his Wikipedia page. Honestly, I don’t know much about him in terms of policy, only the salacious details of his jailing, so don’t take this to be fact. He clashed with Mahathir over nepotism and held more progressive financial policies, before he was removed from office. His comments seems to be more moderate compared to Mahathir.

Comparing the 2, Anwar seems better for business than Mahathir. But I would love to hear any first hand views you may have.

General policies announced

1) GST change to sales tax

Nothing much to say here, just a limitation of scope of GST to only tax certain products. This should imply a reduction of taxes which is pro consumer and business. Doesn’t help the Government budget deficit though. The devil is in the details.

2) Reintroduction of petrol subsidies

Personally, I’m against this type of subsidies as it promotes abuse (Petrol is so cheap! Let’s just drive everywhere) and a crutch mentality. It is also fiscally unsustainable as oil is a cyclical market. In up cycles, the government will have to bear huge subsidies that could have been better spent elsewhere.

That said it is pro consumer and maybe it will boost consumer spending. Also doesn’t help the Government budget deficit.

3) Raising minimum wages

Again, I’m against the minimum wage model as it has proven to not work in many countries. This is because businesses tend to simply comply with the minimum wage and have little incentive to drive productivity and wage growth. I find Singapore’s model of Workfare coupled with productivity drives and upskilling to drive wage growth more sustainable in theory.

At face value, this measure will increase business costs but increase consumer purchasing power to drive spending.

4) Review of foreign investment deals

This is one of the more concerning issues raised with regards to the investment thesis in Malaysia. Is Mahathir going to kick out all the Chinese investments in Malaysia? Is he going to shelve the SG-KL High Speed Rail project? Initial rumblings have not been promising and this is something we have to watch closely if we want to invest.

The wild card – potential structural reforms

With the rigid BN establishment out of the way, there is hope for structural reform in Malaysia to drive it forward as a business friendly destination. Malaysia always had good fundamentals – a enterprising and resilient citizenry, strategically located with a decent hinterland – just that it had been bogged down with its Governmental/societal biases and policies.

If they are able to enact the necessary changes to drive the Malaysian economy forward, I’m sure it can do well.

In summary

The ouster of BN from Government felt like a rallying cry to rid Malaysia of an evil. However, will the PH Government under Mahathir / Anwar present a better alternative?

Therein lies an interesting investment conundrum. There are still many unanswered questions on economic policy that will be fleshed out in the coming year. That said, I trust that our neighbours will find the strength to enact the necessary changes for the good of their country. After all, ending the more than 60 year rule of BN despite all the barriers in place seems comparatively difficult.

For now, I’ll be watching with great interest. And researching Malaysian equities. And looking for good brokers for Malaysia stocks. The SGX – Bursa Malaysia trading link can’t come soon enough.

Happy Hunting,

Lessons from Amazon’s Annual Letter 2017

Jeff Bezos

As you may know, I’ve been following Warren Buffett’s Annual Letter to Berkshire Hathaway shareholders since I started investing for the nuggets of wisdom Buffett offers freely. Apparently, Amazon’s CEO Jeff Bezos does the same thing with his annual letter to shareholders, which was released in the past week. The letter has been touted as a must read for business executives as it offers a view of Bezos’ management style and philosophy. Curious about what he had to say (and because I’m vested in Amazon now), I read the 6 page letter and here are some learning points.

Keeping ahead of Customer Demands through High Standards

This year’s letter shares Amazon’s learnings on maintaining high standards in its vast organisation. Bezos contends that inculcating high standards has 4 key elements:

  1. They are teachable
  2. They are domain specific
  3. You must be able to recognise them
  4. You must coach a realistic scope of achieving them

Are High Standards intrinsic or teachable?

Bezos expresses that it is definitely teachable through exposure and experience. Standards are contagious, if you bring a person into a high standard team, the person has to adapt or fall behind. Conversely if you bring a person into a low standard team, the environment further cultivates laxness amongst the team.

Are High Standards universal or domain specific?

Bezos argues that it is domain specific from his own personal experience. He had high standards on invention, customer service and hiring but was woefully lacking in operational standards when he first started Amazon.com. He had to learn it from scratch from his colleagues. To him, it was more important to recognise that he could have low standards in certain areas and work towards bringing up the standards through experience and learning. Through this awareness, he remains humble and strives towards improving himself.

Bringing about High standards through recognition and realistic scope

Bezos feels that in order to bring about high standards in teams, it requires you to recognise what high standards looks like and also coaching a realistic scope or time frame to achieve those standards. Scope is particularly important in preventing you from giving up too early. To that end, he illustrates this through 2 examples.

1. Instagram worthy handstand training

A friend wanted to learn to perform a handstand without leaning against the wall (ie instagram worthy handstands). She engaged a handstand coach who told her to expect to only be able to do it after 6 months of daily training, instead of the 2 weeks she may expect. If not, she would give up at the 2 week mark of the training.

Recognising the high standard – being able to do a Instagram worthy handstand
Setting a realistic scope – only achievable through 6 months worth of training.

2. 6 page narrative memos

Apparently at Amazon, 6 page narrative memos are written to be read during meetings instead of PowerPoint slides. High standard memos are harder to define, you basically know it when you read it. That said, high standard memos typically require at least 1 week of work and editing in order to be produced. This is contrasted with low standard memos which are typically written in 2-3 days due to the authors’ unrealistic expectation to be able produce high quality memos in that short time frame.

Recognising the high standard – High quality narrative memos
Setting a realistic scope – High quality memos require at least 1 week of work to be written

But what about skill?

Bezos feels that you just need 1 person with the necessary skill to craft a cohesive memo but a whole team to polish it to perfection. He even states that at Amazon, memos are crafted as a team, with no individual credit being given to the memo.

Some thoughts

Much of Bezos’ thoughts generally make sense and reasonate with my personal experience. High performance teams tend to be set and guided from the top. If the leader is undemanding and lax, it tends to breed low standards within the team as there is no impetus and drive to produce quality results.

That said, Bezos’ thoughts hinges on the assumption that individuals inherently want to do well for high standards to be teachable. If the individual simply does not want to improve, they are simply incorrigible. I suppose that’s where hiring processes come in to select at least decent individuals who endeavour to continuously improve themselves.


Amazon’s annual letter to shareholders offers a rare perspective into Jeff Bezos’ management philosophy and culture at Amazon. I will probably add it to my list of annual reads from now on to learn more about the things that make Amazon tick.

Happy Hunting,

Lessons from Berkshire’s Annual Letter 2017

Chairman and CEO of Berkshire Hathaway, Warren Buffett, released his annual letter to shareholders yesterday evening. People in the investment world know that this annual letter summarises Berkshire’s financial performance for 2017 and seeks to educate investors on investing. The letter was so influential that before the advent of the Internet, professional investors owned 1 share of Berkshire just to receive a copy of the annual letter. Now, we have the benefit of reading about Buffett’s thoughts without having to own a single share. The annual letter is highly readable for amateur investors and I would strongly encourage you to take 30 mins of your time to read at least the lessons on investing portion.

The annual letter to shareholders can be found here.

Top 15 Holdings

Top 10 Holdings

The list excludes Berkshire’s ownership of Kraft Heinz stock.

Nothing too surprising here, this year’s list features a bunch of Banks, 2 airlines, General Motors, Coca Cola, AMEX and Apple. Conspicuous by its absence is IBM. The one interesting point here is BYD Company Ltd, which I think might be the first time a Chinese company showed up on this list (don’t quote me on this).

BYD Company is a electric vehicle manufacturer listed on the HKSE (Symbol 1211) and Shenzhen and headquartered in Shenzhen. I have known that Buffett had invested in this company for many years now, but it was never substantial enough to appear on this list. I suppose the price explosion back in September 2017 for BYD propelled it into his top 15 holdings. Having paid about HKD 8 a share about 9 years ago to the current price of HKD 73.20, that is a impressive return. One to do more work on.

Never borrow to buy stocks

Haha apparently Buffett and I were thinking about the same thing recently – Peace of Mind Matters. Part of that is to never incur debt to buy stocks. He illustrated this point through the 4 times in Berkshire’s history that its stock price collapsed by substantial amounts:

4 Berkshire Collapses

He argues that leverage unsettles you in times of severe market selloffs. In his own words:

There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.

In the next 53 years our shares (and others) will experience declines resembling those in the table. No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow.

Results from THAT bet

Some of you might recall that I outlined the cost of active fund management last month. In that article, I talked about how Buffett made a bet back in 2007 against Protege that a low cost S&P 500 index fund would outperform any portfolio of 5 funds. The bet expired at the end of 2017 and here are the results:

Bet results

As you can see, the S&P 500 handily beat any of the funds on a final or average annual gain. Only in 1 year, 2008, where the funds outperformed the S&P 500. Looking at these figures, I can’t help but feel bad for people who invest in these funds as they experience somewhat of a lost decade while their money managers earned ridiculous sums. As Buffett says in the letter,

Performance comes, performance goes. Fees never falter.

Bet Lesson #1 – Disregard mob fears and enthusiasms and focus on a few simple fundamentals

Buffett details how in the early days of the bet, Protege and Buffett had decided to hold the bet funds in $500,000 of zero coupon US Treasury bonds. 5 years into the bet in 2012, they were faced with a valuation mismatch between bonds and equities. The Treasury bonds was yielding 0.88% if held to maturity while by holding American equities, they would have earned 2.5% from dividends with almost certain further prospects of dividend growth, share buybacks and earnings expansion.

They agreed to hold the funds in Berkshire B shares instead, resulting in the charity of Buffett’s choice, Girls Inc of Omaha, ultimately receiving $2,222,279 instead of the $1 million the bet originally started with. Seeing the fundamental mismatch in value and acting on it, yielded a much better return.

Bet lesson #2 – Risk free bonds can increase risk

Buffett describes investing as “activity in which consumption today is forgone in an attempt to allow greater consumption at a later date” and that risk is the likelihood of that not being attained.

Faced with the prospect of the Treasury bonds yielding 0.88% from holding to maturity in 2012, it was in fact riskier to hold on to the bonds as even a low inflation rate of 1% would have reduced your consumption power at the end of the bet. Evaluating risk levels based purely on bond allocation in a portfolio is a fallacy that potentially gives a warped view of investment risk.

Bet lesson #3 – Stick with big, “easy” decisions and minimise activity

The fund managers of the 5 funds undoubted would have made many asset allocation decisions over the course of the bet, while Buffett and Protege only made 1 decision – sell the Treasury bonds, buy Berkshire B – and still handily beat them at 8% while sipping margaritas on a beach somewhere. Look for good investments, stick with them and you will not regret it.


Buffett’s annual letter to shareholders once again delivers on educational value. After decades of writing these letters, he has developed a knack of presenting his thoughts clearly and sometimes in a “quotable quote” manner. It was also a bit uncanny how some of my recent posts echo-ed some of the lessons presented in the letter.

Much to reflect upon.🤔

Happy Hunting,