Ep11: Alan Lim Seong Chun – How Complacency Weakens Risk Awareness

Alan Lim Seong Chun is currently a Senior Research Analyst at the research division of MIDF Amanah Investment Bank Berhad. He has close to 10 years’ experience as a sell-side analyst and has covered sectors which include plantation, property, REITs, and telecommunication. He is a Chartered Financial Analyst (CFA) with a first degree in Computer Science from University of Technology, Malaysia. Alan consistently achieved high Bloomberg ranking for stocks under his coverage. As of 21 August 2018, he is ranked No 1 for IOI Corporation Berhad, Kuala Lumpur Kepong Berhad, FIMA Corporation and Ta Ann.

In this episode, Alan shares how complacency brought by the property boom weakened his risk awareness leading to his worst investment.

 

 “Success can lead to complacency. We thought that things that go up will probably go up further.”

– Alan Lim Seong Chun

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Resources: 

 

Topics Covered: 

00:57 – Alan Lim’s professional and personal background

02:33 – Alan shares his worst investment ever story and the circumstances that lead to it

04:10 – Acquiring his second property thinking that the same return like his first will continue

04:33 – Negative cashflow from the second property

05:32 – Alan shares his feeling from his first property success

06:45 – Why financial professionals do not apply their principles when doing their investment decisions?

08:06 – Lessons that Alan learned from the experience

10:18– Andrew’s takeaways from Alan’s investment story

14:02– Actionable advice that Alan recommend for people to avoid suffering the same investment mistake

 

Main Takeaways

  • Lesson 1: The concept of liquidity. When you buy a house or start a business, the liquidity of what you are buying is very low. It is very hard to get out. It is not an easy thing to get in and out of. Unlike in stock market or Real Estate Investment Trust (REIT), you can buy and sell them in the stock market.
  • Lesson 2: Property investment can be a trap. Because you do not have liquidity, you put your money in, you got the financing from the bank and all of a sudden everything falls. It is hard to find a buyer for it and you are basically stuck in it.
  • Lesson 3: Buying condominiums and this type of properties and thinking you got to rent it out. Remember it is a whole business. There are people who are running a business of renting out, and therefore there is a lot of overhead, hassle and a lot to it.
  • Lesson 4: You can earn a return in Real Estate Investment Trust (REIT) somewhere between 5%-9% depending on the market that it is in. The capital appreciation is low for REIT it does not grow that much compared to a normal company but people can look at a REIT as a relatively safe low volatility way of investing money and getting a dividend or higher return. Not always, but that REIT is something that has liquidity and you could get out if it does not work.
  • Lesson 5: Never believe what other people say about their investments. Because a lot of people only talk about their winners and they are not calculating it fully.

 

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About the author, Andrew

Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company that provides institutional and high net worth investors with ready-to-invest stock portfolios that aim to beat the benchmark through superior stock selection.

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