Winning the long-distance race in fund investment
Just as we urbanites are addicted to smartphones, Tony Tsoi has an obsession with running shoes. By maintaining his physical well-being and managing wealth, Tsoi has mastered the skills to stay "healthy" in both arenas.
"I have travelled to many places around the globe as the job I have been doing for almost 20 years takes me everywhere," says Tsoi, the founder of Stand News and the former CEO of Varitronix International Limited. "I also travel widely with my family. I must admit that I bring along my running shoes when I travel abroad 100% of the time, even on single-day trips."
But why the preference to run on foreign soil? Tsoi explains that running in an unfamiliar environment gives him a sense of wonderment, even with the help of a map. The fresh air and cool temperature in some foreign countries are also ideal for running.
Overcoming the blind spots in investment
Tsoi compares investing to running as both share similar features. Just as he likes to run in different corners of the world, investment is not bound by geographical locations. "It doesn't matter where you sit or where you live," says Tsoi. The rapid transfer of information and decreasing transaction costs have facilitated foreign investment. As most Hong Kong investors concentrate their investments in Hong Kong and China, investing overseas can help them diversify investment risks. Furthermore, enterprises from different regions usually entail different industrial advantages. For example, Swiss companies are outstanding pharmaceutical players while German companies excel in industrial equipment. Foreign investments open up the door for investors to invest in enterprises that would otherwise be inaccessible to most of us. Needless to say, investors must pay meticulous attention to the investable universe of different mutual funds: some funds tend to concentrate their investments in relatively risky areas, such as emerging markets, high-risk industries or stocks with small and medium market capitalisations. Investors should base their decisions on their risk tolerance and their own needs.
But how can we start investing overseas? Tsoi suggests mutual funds as one of the investment tools to achieve this purpose. Mutual funds require a smaller principal investment and they are managed by professionals so you don't need to monitor the market every second of the day. Tsoi points out one of the advantages of fund investments, which is often overlooked by investors: "The best thing about investing in mutual funds is that it can help retail investors overcome their biggest weakness – poor market timing. Human nature is hard to change. For example, some people are holding stocks that could potentially grow tenfold. However, they often lack patience and sell the stock after a 20% to 30% increase, thereby forgoing the chance to maximise profit. In contrast, mutual funds are medium- to long-term investments where fund managers will make selling decisions on your behalf. These can save you from the curse of ‘winning a little, but losing a fortune'."
Control the pace of your investment
Just as a pair of running shoes is indispensable for running enthusiasts, choosing the right mutual fund should be the prime concern for investors. Tsoi reminds us that, since the transaction fees of mutual funds are quite expensive, the asset class is not suitable for frequent trading. This underscores the importance of understanding your own needs when it comes to picking the right mutual funds. Tsoi light-heartedly advises our reporter to be more aggressive in the investment arena. As our reporter is still quite young, Tsoi suggests that he should invest more in stock funds, but he prefers a safer choice for himself – the stable stream of income offer by bond funds would satisfy his needs.
After deciding on which class of mutual fund to invest in, how should we select individual funds given the abundant choices in the market? Tsoi says: "Although the past performance of mutual funds do not represent their future returns, it can serve as a useful reference, just as we refer to job candidates' resumes when we hire people. Sizable fund houses are not necessarily better. It is normal that some funds underperform their benchmark indexes once in a while. However, if a fund consistently falls behind index return, it should be excluded from our list of consideration."Other Expert Talks