Me & My Money

Me & My Money: Diversifying portfolio to ride out risks

AI firm's CEO stays invested to reap long-term returns, while avoiding short-term pitfalls

Diversifying his portfolio forms the backbone of Mr Liu Feng-Yuan's investment strategy.

This diversification is useful in helping him stay invested for the long term and avoiding short-term risks and pitfalls, he adds.

Mr Liu, 38, is the chief executive and co-founder of artificial intelligence start-up BasisAI, which aims to build responsible artificial intelligence (AI) solutions.

It was founded in 2018 and received around $8.2 million in seed funding from Temasek and Sequoia Capital, in one of the largest seed rounds raised by a Singapore start-up.

The firm is now a team of 20. It is focusing on product development and identifying products that fit the market at this stage.

Mr Liu said: "We're looking to scale the adoption of our proprietary AI platform, Bedrock, within sectors such as financial services, telcos and healthcare."

Bedrock is a machine learning platform that enables enterprises to build and scale responsible AI systems that are more transparent, explainable and fair.

Mr Liu, who previously held appointments in the public service, such as at GovTech, the Land Transport Authority and the Ministry of Trade and Industry, graduated from Oxford University with a master's in philosophy, politics and economics.

He also holds a master's in economics from the London School of Economics and Political Science.

His wife, 36, works at Amazon Web Services as the head of public policy for Singapore and Asean strategic projects, and they have a son who is around 11/2 years old and a newborn daughter.

Q: What's in your portfolio?

A: I invest using Endowus, an online platform that allows me to invest in mutual funds. I specified an 80-20 allocation ratio between equity and bonds, and Endowus recommends the funds, which are a combination of Dimensional World Equity Fund, Pimco GIS Global Bond Fund and Pimco GIS Emerging Markets Bond Fund.

 
 
  • Worst and best bets

  • Q: What has been your biggest investing mistake?

    A: It was not putting more money to work in investments earlier and all the forgone compound interest. The lesson learnt is not to put investments off.

    Pay for proper professional advice on financial planning, then quickly execute and don't wait.

    What I like about Endowus is how easy it is to make a transaction and fund it. I was able to do the preliminaries to set up an account in 15 minutes and then ready to trade in a week.

    I started investing when I was 16 with an investment gift. But I never really actively invested until I was about 35. I should have started when I was 25.

    Q: And your best investment?

    A: The best investment was one we stumbled upon. When my dad died more than 10 years ago, he had a few penny stocks left in his Central Depository account that we inherited. The transaction cost of trading them meant the proceeds would have been negligible, so we hung on to them.

    We would receive monthly statements and then some time in 2013, we realised that the value of one of the stocks increased pretty significantly - it grew about eight times the original value. I researched the company but it was not really doing anything of note that would justify the share price increase.

    It seemed strange to me, so I told my mother to quickly sell the stock and cash in. She had enough to help her put a down payment on a new car.

    A few months later, Blumont Group's stock crashed and it was investigated as the largest incident of market manipulation. A relative of mine lost money when he bought it before it crashed.

    It re-emphasises the vagaries of the stock market - how much luck is involved in the process and how risky stocks can be for people who don't understand it. 

    Sue-Ann Tan

I picked passively managed funds to keep costs low and because I believe I don't know enough to be able to pick the best active fund managers. Instead, I intend to stay invested and diversified to reap long-term returns.

I actually try to ignore the average annual returns. The philosophy I take is to invest for the long term and stay invested in a diversified portfolio.

Long-term compound growth will outweigh short-term fluctuations, so I want to avoid even thinking about short-term fluctuations and looking at my returns lest it leads to emotional weakness. It's about making sure the rational side of me wins out.

Q: What are your immediate investment plans?

A: My plan is to continue to devote a percentage of my income to a diversified portfolio. I've automated the process to invest a fixed amount every month so that I don't have to think about it.

Q: How did you get interested in investing?

A: I was embarking on a start-up, which meant a significant reduction in my take-home pay, and at the same time I had a newborn. I really started to think about planning for retirement and the child's education, so that was the real impetus for being more deliberate about investments.

My first investment was actually a gift from my late father. He bought me into a few mutual funds as I did well for my O levels in 1998.

My late father probably also did this because it was in the aftermath of the Asian financial crisis and as a banker, he knew stocks were undervalued. The investment was into one of the Aberdeen unit trusts for Singapore, Malaysia and Thailand. We haven't touched it since and I think the value of the investment has tripled.

Q: Describe your investing strategy

A: It is diversification, because I don't have time to understand individual stocks and the market.

I read The Intelligent Investor by Benjamin Graham many years ago and I suppose I was influenced by that. And also, I studied economics, so I believe in the efficient-market hypothesis and that it's hard to beat the market.

 
 

I was also very convinced by Dimensional's annual publications, which show visually the performance of asset classes over short and very long time periods. It showed that over a 20-year time horizon, investment returns are much more consistent than over shorter time periods.

Q: What else is in your financial plan?

A: About a year ago, my wife and I went to see the good people at Providend, who are financial planners. They helped us put everything together and also developed a plan tailored to our needs.

It considered what we needed for retirement, assumptions about kids' education, insurance, how to make full use of the Supplementary Retirement Scheme and Central Provident Fund nominees.

It was pretty comprehensive and then there was a plan that made sure we had enough pots for retirement and the children's education, and that we didn't over-insure nor under-insure.

It was a really reassuring exercise because while I had usually saved a good proportion of my income, I didn't have a systematic plan before.

Q: How are you planning for retirement?

A: All the parameters were part of the plan that Providend put together. I remember somebody advising me that I should plan to live to 100, so that's what I assumed.

I don't remember the end amount at retirement, but what was very clear to me was the amount of money I needed to set aside now as a lump sum, and the recurring investment to ensure I had enough for retirement. I knew overseas education was expensive, but I hadn't realised I needed to set aside almost $600,000 for two children's overseas education.

I don't think I will retire till I am at least 70. But it would be really nice to have the option to retire at 55 or 60. So that everything you do in that last decade is based on how you can give back rather than out of need.

Q: Moneywise, what were your growing-up years like?

A: My late father was head of the private banking department at a regional bank, and my mother worked for her family business supplying equipment for the oil and gas industry, but is now retired. I have one brother.

I grew up in Braddell View, which was then a Housing and Urban Development Company estate where there were lots of former teachers and civil servants.

My parents didn't have university degrees but my father worked his way up to leadership positions in one of the local banks.

We had a fortunate upbringing where we never felt that we were deprived of material wants or needs, nor did we have an excess of luxury.

I realised later that this was because of meticulous planning and saving on my parents' part.

When the financial crisis of 1984 hit, my father had to move the whole family - my brother was just born and I was two years old - to Jakarta to take on a new job to set up the bank's offices in Jakarta, where we lived for two years.

It was a big risk and change for the family, but the sacrifices allowed the family to get on a more stable financial footing.

Q: What does money mean to you?

A: It converts time, specifically time spent on work, into material pleasure.

Q: Home is now...

A: A three-room freehold condominium in West Coast that is about 1,400 sq ft.

Q: I drive...

A: A dark blue Audi A3.