Tan Chong-Koay: chief executive of Pheim Asset Management

[alvin]

I always look forward for inspiring stories from Lorna Tan's "Me & My Money Series" published in the Sunday Times. Hence here is the reporduction:

After having successfully helped three financial firms build their investment service businesses, Mr Tan Chong-Koay was offered a licence to set up his own fund management firm by the Malaysian regulator in 1993.

He gladly took the chance and, together with a few partners, set up Pheim Asset Management in Kuala Lumpur in 1994.

The following year, with his partners, he set up Pheim Asset Management (Asia) in Singapore after getting the necessary approval. Both firms took off almost immediately.

Pheim's flagship fund - the Asean Emerging Companies Growth Fund - has been ranked No.1 among Asean equity funds by credit rating firm Morningstar for many years. As of the end of November last year, the year-to-date return was 102.86 per cent versus the FTSE All World Asean Index of 65.74 per cent.

Mr Tan, who turns 60 today, cites the two firms that he co-founded as his best investments.

The veteran fund manager and entrepreneur obtained a business degree from Western Illinois University in 1973. Two years later, he got an MBA from the same university.

From 1976 to 1981, he worked at South East Asia Development Corporation as head of investment services. This was followed by stints in Arab-Malaysian Merchant Bank (now known as AmInvestment Bank), Singapore-based DG Bank-GZB (Asia) and John Govett (Asia), the three firms whose businesses he helped to build up before he set up Pheim.

Mr Tan, who is Malaysian and a Singapore permanent resident, is married to a Malaysian who works here, and they have two daughters, aged 31 and 23.

Q: Are you a spender or saver?

My mother used to say: 'You can't get poorer if you spend less than you earn. You obviously can't get richer if you spend more than you earn.' I am definitely a saver. When you save, you have funds with which to multiply your wealth. In my initial years of working, I was saving 20 per cent to 30 per cent of my income, and as my career stabilised, I was able to save more.

Q: How much do you charge to your credit cards every month?

I don't charge more than $3,000 a month. I use credit cards for convenience and try to settle promptly at the end of each month. I have seven cards or more, and I generally use two of them. I go to the ATM as and when I need cash. I always keep $500 handy.

Q: What financial planning have you done for yourself?

Most of my personal wealth is in my two fund management companies. Besides that, I park my money in savings, fixed deposits in various currencies (US dollar, Malaysian ringgit, Singdollar and Australian dollar) and properties. I put most of my personal disposable wealth in the money market and properties because I want to avoid conflict of interest since my two fund management companies invest in equities.

I follow two simple rules: First, save money to multiply wealth. I don't have expensive habits. Second, generate constant flows of income. You must strive to succeed either in your job or your own business. Do what you love, love what you do.

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

I was born in a kampung in Kedah which did not have running water or electricity. I was No.8 in a family of nine children. We lived in a five-bedroom shophouse. My father ran a grocery shop, and my mother was a housewife.

While we were not very poor, we were taught thrift from a young age. I had to help out in the shop when I was in primary school, but when I went to Penang for my secondary education, I went back to help only during school holidays.

When I went to university in Western Illinois in the United States, I was very disciplined and worked every spare hour as a student to save money.

Apart from the US$100 per month, which my fifth brother sent me for my first nine months there, I basically funded my own studies the whole time I was a student there. I worked in restaurants and dormitory canteens where I could get free meals.

Q: What property do you own?

In 1988, I bought a 3,200 sq ft penthouse in East Coast for $623,000 and sold it in 2007 for $1.8 million.

In 2004, I bought a 2,500 sq ft three-bedroom penthouse in East Coast for $1 million. In the same year, I bought another unit in the same development for $750,000. This one is 1,400 sq ft and is meant for my older daughter's future use. The monthly rent is more than $4,000. Both units have increased in value, and it should be around $800-$900 psf.

I also own a 2,200 sq ft three-bedroom condo in Kuala Lumpur, where I work once a week. I bought it about 15 years ago. I can't recall the price.

Q: How did you get interested in investing?

When I returned to Malaysia with my MBA in 1975, I took my father's advice to look into plantation and tin stocks, which he thought had good prospects. I decided to look for undervalued stocks to invest.

I made my first investment in vehicle retailer Inchcape. Although it was not a commodity stock, I thought it was oversold after the stock plunged following the loss of a car distribution franchise. I bought some shares at RM2 each. In the next few months, the stock recovered to more than RM3 per share. From then on, I decided I would make a living out of value investing.

Q: What is the most extravagant thing you have bought?

For 25 years, I wore a Swiss Rado watch. But in 2008, I bought a Tag Heuer for less than $3,000 for daily use. In the same year, I spoilt myself with a $8,000 IWC watch. but I wear that only on special occasions. Otherwise, I am pretty frugal.

Q: What is your retirement plan?

I don't intend to retire, but if for some reason I do stop working, I don't think I need more than $5,000 a month as I have an apartment each in Singapore and Malaysia, a car and a club membership, and I still have sufficient savings in my Central Provident Fund and Malaysia's equivalent, the Employee Provident Fund.

Q: Home is now...?

My penthouse in East Coast. I live here with my wife and younger daughter, who is a fourth-year medical student at the National University of Singapore. My older daughter, a certified financial analyst, is working in the United States.

Q: I drive...?

I drive a company car. It is a white Lexus 300E.
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Savings plan

'I follow two simple rules: First, save money to multiply wealth. I don't have expensive habits. Second, generate constant flows of income. You must strive to succeed either in your job or your own business. Do what you love, love what you do.'

Mr Tan, on his financial planning
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WORST AND BEST BETS

Q: My worst investment to date?

Among the local stocks Pheim lost money on is China firm Fibrechem Technologies, which is still under trading suspension. I also invested in electronic waste recycler Citiraya, which came under investigation and lost virtually most of its value. This happened a few years ago.

Q: My best investment to date?

I love the fund management business. The two companies I co-founded are my best personal investments to date, and that is where most of my personal wealth is. Currently, I own 45 per cent of the Malaysian firm and 66.5 per cent of the Singapore one. I invested RM1 million in the Malaysian firm and $200,000 in the latter. As of September last year, the total shareholder funds of the two firms have grown to RM26 million (S$10.7 million) and $8.13 million, respectively. As of end-November last
year, Pheim's combined assets under management amounted to US$1.44 billion (S$2 billion).

[Dennis Ng]

Thanks Alvin for sharing.

Yes, the "Me and My Money" Column is a must read for me every Sunday.

Below is the interview I had on 4 Nov 2007 for the Me and My Money Column sharing my "story", I was still on my way to reaching my first million dollars then.

Ex-banker likes chalking up good debt
Lorna Tan, Sunday Times 4 Nov 2007

DEBT holds no fears for Dennis Ng, as long as it's the right sort of debt.
Since he is the founder of mortgage consultancy Leverage Holdings, this view isn't unusual, but it does contradict everything his parents taught him when he was growing up.

He told The Sunday Times: 'They always told me that if I do borrow, I should pay off my loan as soon as possible. I used to think that way too.
'However, after I became financially literate, I realised there was good debt and bad debt.'

Debt is bad, says Mr Ng, 38, when you incur it to fund your consumption through, say, car or personal loans or credit card spending. Avoid this type of debt or settle it as soon as possible.

Debt is good when you can use it to earn a return that is higher than the interest on the debt. For instance, keep your mortgage if 'it makes financial sense'. Mr Ng's comes to just over $100,000.

'Many people are unversed in finance and debt, so they stick to concepts such as 'be debt-free as soon as possible' without really examining them. If you really think about it, a housing loan is the cheapest loan anyone can ever get,' he said.

Interest rates come to 3 per cent to 4 per cent for housing loans, about 6 per cent for car loans and about 8 per cent for renovation loans. You pay about 20 per cent for GE Money EzyCash and 24 per cent for credit cards, he added.

Instead of using his savings to pay off his housing loan as quickly as possible, he channels his cash into higher-yielding investments such as shares, land banking and traded endowment plans.

He explains that he considers himself to be debt-free overall as his investible funds are more than three times what he owes in loans.

He also backs insurance planning as a way of transferring the potential risk of financial losses that might arise from unforeseen circumstances.

'Insurance is like a goalkeeper in a soccer match. It fends off disasters,' he said. 'But you win by scoring, not defending. Financial investments, like strikers in a match, help you hit the goal.'

Mr Ng was deputy manager of international banking at Keppel TatLee until 2000.

In 2003, he co-founded Leverage Holdings www.HousingLoanSG.com with his wife Patricia Hung, 36. They help clients sieve through all the loans packages put together by banks and finance companies. The service is free as the banks pay Leverage if a match is made.

Q What are your money habits?
A When I started working, I saved at least 10 per cent of my income. Even when I earned more, I tried to maintain the same living standards to keep costs down. I have saved about 40 per cent every year for the past few years.

Q What financial planning have you done for yourself?
A I keep a 'just in case' fund that can cover my expenses for 12 months. I also have an 'opportunity' fund. This is cash set aside to take advantage of rare bargains. For instance, when stock markets crashed in 2002, I used it to buy stocks whose returns have exceeded 500 per cent in some cases.

Q What about insurance planning?
A With insurance, I make a much smaller capital outlay in the form of premiums but I can still cover any heavy expenses if something happens.

I have comprehensive medical insurance and endowment plans for myself, and other plans such as critical illness for my family. Most of the risks have been transferred to the insurance companies.

Recently, I invested in UK-traded endowments, which are expected to generate returns of 6-8 per cent a year, double those of policies in Singapore.

My total annual premiums exceed $12,000.
Q What's your investment philosophy?
A When people invest, most think only of making money. When I invest, I always ask myself what the worst-case scenario would be, and whether my financial position would be hurt.

Q Any other investments?
A Property - I believe Singapore's market is on an uptrend and might rise another 10 to 30 per cent.

A few months ago, I bought a flat at Kent Ridge for $900,000. If the collective sale is successful, it could bring in $1.7 million.

In April, I bought a two-bedroom, 900 sq ft apartment at Tanah Merah for $600,000 and sold it in August for $700,000. I've re-invested the profits in a 600 sq ft studio apartment on Lavender Street. I paid $480,00 for it in June; it's worth $650,000 now.

I've also invested in fine wine, gold through an exchange-traded fund and land banking.

Q What has been a bad investment?
A In 2001, I invested in Eagle, a Singapore-listed China ceramic tile maker, at 30 cents apiece. I lost 65 per cent of my money. I've sold two-thirds of my holdings; I'm holding on to the balance.

Q Your best investment to date?
A The best returns have been from my investment in TPV, a manufacturing stock. After five years, my returns topped 500 per cent. I bought the stock in 2001 at 25 cents; last year, it went as high as $2.

I believe in investing in growth stocks that have yet to attract fund managers. They're usually interested in a firm only if it makes more than $1 billion in turnover. When I invested in TPV, it was almost there; now, it makes more than $10 billion. I sold the stock last year as I thought the firm would find it hard to continue growing at that pace.

Q What's your retirement plan?
A To achieve financial independence by age 40. I'll need at least a million to provide a monthly income of $5,000, based on a 6 per cent annual yield.

Q Any tips for house owners looking for a loan?
A People always ask which bank's housing loan is the best now.

There are more than 100 different types of packages and what is best for one person might not work for another.

Know your needs and priorities, and pick the package that best fits you.
Buy within your means and aim to pay off the loan by the time you retire.

Q And your home now is...? A A five-room HDB resale flat in Jalan Besar. I bought it in 1995 for more than $400,000.

Q And Your car is?
I don't own a car, as I personally think Singapore is one of the few countries in the world one can do without a car.

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On retirement 'I firmly believe the solution to the retirement problem is not extending the retirement age but increasing financial literacy.'
MR NG, who says he will still work after retirement but will devote more time and effort to improving financial education.

[wemakebread]

It's my fav column of the week too!
These are all my passive sifu

I like the principle of "Spend less than you earn" from the first article above.
Positive cashflow every month!

[Dennis Ng]

It's my fav column of the week too!
These are all my passive sifu

I like the principle of "Spend less than you earn" from the first article above.
Positive cashflow every month!

yes, the first step towards Financial Freedom is spend less than you earn. Anyone who say otherwise are not telling you the truth.