Investment 101 with Mark Wang, Chief Investment Officer, NTUC Income
By Income, 21 March 2018 2253
Looking at what happened in 2017, what is your take on the market environment for this year?
Public equity markets have done very well in 2017. We saw economic recovery stabilising in developed markets, as well as improved fundamentals in emerging markets. Given the positive backdrop of global synchronised growth and gradual monetary policy tightening, conditions remain favourable for risk assets such as equities in 2018.
As investment professionals, we manage insurance portfolios from multiple dimensions: risk versus return and absolute returns to meet long term policyholder’s expectations versus relative return to beat market benchmarks. To achieve sustainable returns in the long-term, we should constantly monitor a number of market factors and overlay this analysis with our qualitative judgement.
What are some of the biggest challenges you foresee for investors?
Structurally, we are likely to remain in a “low-growth, low-interest rate” environment as downward pressures from aging demographics, low productivity growth, and high debt levels pose as headwinds to the economy. Central banks around the world are treading cautiously in their plans to raise rates. That said, I believe interest rates should rise gradually over time, even if they will probably stay well below historical averages. This poses a challenge for investors as it will be harder to achieve the same amount of return for the same amount of risk that is undertaken. Investors will have to reassess their return expectations going forward, or venture out of their current risk-curve to meet their investment objectives. Market knowledge will still be crucial so it is important for any investor to keep abreast of new investment assets and techniques.
What are important traits to have for someone to be a successful investor?
Successful investing requires an investor to have a thirst for knowledge. This requires one to constantly learn and gather insights about the world. This learning is not confined to only investment markets and the economy, but also about new technology and politics, so that one is able to spot opportunities in the markets that are not easily recognised by other investors. Independent thought is also needed to hold on to convictions when the whole market is moving against him or her. And finally, discipline is key when it comes to managing money. What I mean by ‘discipline’ is the ability to make rational investment decisions without being swayed by emotion.
What is your own investment philosophy and what’s in your personal portfolio?
Never invest in anything you do not fully understand. This principle applies to both company portfolios and personal investment. As an institutional investor, Income performs thorough and rigorous analysis before making investment decisions. I also exercise similar due diligence for my personal account. Most of my personal investment is in the form of unit trusts, and I rely on fund managers to make professional analysis-based decisions on the stock market for me.
In addition, I find dollar-cost averaging to be an effective way to diversify market-cycle risk and one typical dollar-cost averaging strategy is regular premium investment-linked products. An important lesson I’ve learnt from my past experiences is to not time the market. One common mistake many investors make is timing the market based on his/her own knowledge, emotions, or inclinations to just follow the crowd. Instead, a disciplined investor should constantly invest and rebalance his/her portfolios based on readings of the economy, market and individual company performance.
How important is investing, to retire comfortably at 67?
Investing is an option to consider for anyone wanting to retire comfortably. As Albert Einstein says, the compound interest is the most powerful force in the universe, so start early. For example, if you start investing $10,000 at the age of 35, and the investment returns are 10% annualised, you would retire with $211,138 when you are 67. However, if you invested the same $10,000 at the young age of 20, you would retire with $881,975 instead.
The principle here is to let your money work for you and let the power of compounding do its job. If you start early, consistently setting aside money to invest, you should be able to retire very comfortably at 67. Saving money alone is simply not enough.
What advice do you have for a young person who wants to begin investing?
My belief is that to be successful in whatever you do, you first need to have a real passion and interest. With changes in the regulatory environment and the advancement of technology, the investment industry landscape has shifted dramatically over the last 10 – 15 years, such as the rise of passive investment which now has a huge impact on active fund management, including buy-side fund managers and sell-side analysts. The industry has gotten a lot more competitive and there are also emerging opportunities for new investment techniques such as factor investment and behavioural finance for us to learn and explore. The learning journey for an investor is endless, so always keep an open mind and never think you know everything.
What is the most memorable moment in your career as an investment professional, and what are some key lessons you've learned?
Before coming to Singapore, I was based in the U.S. where I lived through the Dot.com bubble. I also experienced episodes such as SARS in Hong Kong in 2003 and Malaysia during the Global Financial Crisis in 2008.
It is always stressful to be an investor during times of crisis, because you need to be brave enough to be the first one to get in and yet be savvy enough to not be the last one to get out. As an investor, I have learnt to respect investment discipline, a thought and analytical process to evaluate all relevant information before making decisions so that you do not sell low and buy high. As an individual, I have learnt to work with people of diverse cultural backgrounds which helped to broaden my perspective and gave me a global insight on current issues.
Mark is the Chief Investment Officer at NTUC Income, a role he’s held since 2015. Before joining Income, Mark spent the last 22 years working in four different countries where he held various positions before moving to Singapore. At Income, Mark oversees the company’s investment governance framework and processes, identifies new investment opportunities, and leads the team in strengthening the support for Income’s investment-linked products.