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Ken Chee: 3 Misperceptions You May Have about Investing
Aspire, Thought Leaders | 30 November 2015
By: Chen Xushuang
Articles (26) Profile

Multi-millionaire value investor, award-winning entrepreneur and founder of the 8I Group Ken Chee is also the author of the book “Value Investing for Beginners”. The book serves as a simple guide for new investors to help them kick-start their investing journeys. With the help of many case studies as well as Ken’s own anecdotes, it teaches readers how to unearth good businesses for investment and apply the effective process of value investing.

In this book, Ken has also pointed out three common misperceptions people tend to have, that hinder them from making effective investments.

Misperception #1: Investing is redundant as one can retire comfortably with only savings.

Investing takes time and effort. Furthermore, it can be risky. So why bother doing it?

Ken explains that the primary objective of investment is to beat inflation and preserve the purchasing power of one’s money. The official inflation rate of Singapore stands at 3 percent to 5 percent per year, but according to Ken’s calculation, it is around 8 percent per year. Unfortunately, personal income and bank interest rates do not grow at the same pace. Thus as a result, the working class or middle class gets turned into the “slave class”, where an average person has to work very hard to afford the rising cost of living, and probably spend a lifetime trying to pay off housing mortgage for a flat that he can only own for 99 years.

Factoring in inflationary pressures, one would need to be at least a millionaire in order to retire safely (not comfortably), wrote Ken. And this is only given that during one’s retirement period (of about 20 years), he has no existing loans or mortgages, does not have serious illnesses, and spends not more than S$1,500 per month.

With this in mind, one might want to actively seek sources of passive income.

Misperception #2: If a business is good for consumers, it is good for investors.

 

 

Ken advises investors to invest within their “circle of competence” and area of interest, but he also reminds that it is important to switch from the “consumer” mindset to the “investor” mindset.

According to Ken, some companies may be doing well and have the right management, but they may have the wrong business models and are less likely to achieve sustainable growth in the long run.

In short, there are two types of businesses that Ken would think twice before putting in his money.

  1. Businesses with “immortal” competitors that do not get eliminated by market forces, such as the case for national airlines.
  2. Businesses in very fast-changing industries where leaderboard positions change too quickly, such as the case for the mobile phone industry.

In his coming Value Growth workshop on 5 December, Ken will teach investors how to spot a good business to invest in.

Misperception #3: One cannot invest when the world is facing economic crisis.

Investors are often wary of the fact that the market is irrational and sensitive to the happenings around the world. However, Ken thinks that crises can present opportunities too, and that is the time investors would be able to “buy something at 50 cents when it is worth $1”.

“Our job as value investors is to identify the right companies and ride on the waves,” he wrote.

To him, value investors need not be too boggled by the movements of the stock market because it might not even be correlated to the performances of specific companies with the “3R”s (right business model, right management, and right valuation versus price).

To prove this point, Ken has again included various successful case studies in his book, which will be given to attendees of the Value Growth Workshop.

As a Communications Studies graduate specialising in journalism, Xushuang is keen to observe and explore issues that readers want to know more about, and to deliver quality content through engaging writing.

Please click here for more information about this author.


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