COMMENT BY TAY HAN CHONG
WHEN my wife was pregnant with our second child, a colleague warned me I will soon be sleeping in one room with the older child, and that my wife will be sleeping in another room with the newborn. I laughed and dismissed it as a remote possibility.
Fast forward by a few months and the prospect does not seem so remote after all. I spent the last few nights sleeping with my elder son either in the guest room or on the hard floor of his playroom. My wife slept separately in the bedroom since she had to breastfeed our baby girl.
The reason for this “separation”? My son caught a respiratory tract infection and had a persistent high fever and relentless cough. My son probably caught the virus from school, and this was his worst bout of illness thus far.
Under the doctor’s specific instructions, we tried to separate our two children as much as we could. My son’s fever and cough were at its worst at night. However, despite the effort in separating the two siblings, our daughter was infected and ended with a chesty cough. Now both are on antibiotics.
Apparently, my story of parenthood is not uncommon. In fact, a quick check with the families in the condominium revealed a similar story. And so I received yet another piece of advice – I should have listened to my colleague’s advice of separating the two children as early as possible, and not wait until I saw the doctor.
I should have known better. After all, the advice given by someone with three children on taking care of a sick child is backed by many years of experience. This certainly reminded me of the many occasions when I passionately shared my investing pains only to have the clients come back after one or two years to say that they should have heeded my advice earlier.
This hiccup in my parenting experience brings to mind a few investment concepts. These are often shared but ignored by many. What did I learn from this experience?
1. Never laugh at any advice, even if it sounds irrelevant at that time.
2. Never assume that the unexpected will never happen.
3. Appreciate the power of “divide and conquer”.
I realised that I could apply what I have (re)learnt about parenting to portfolio investing.
First, listen to advice. I will now pay more attention to my wife when she shares parenting advice from a popular British “baby whisperer” and an Australian author (apparently she has a lot of experience in being a nanny). I used to dismiss such advice, but not any more. They may not be considered experts, but these authors have experiences that we can learn from, and enable us to avoid parenting pitfalls with our children.
Hence, drawing a parallel, for our investment needs, we should listen to people and organisations that have access to information that is not readily available to the casual investor. If you feel uncertain about the advice you have received from an investment specialist, seek additional advice from a few more specialists before making your own conclusion on what portfolio best suits your risk appetite.
Secondly, when times are good, it is easy to get complacent with what you have. We feed our son probiotics and fish oil daily, and ensure that he has a healthy lifestyle. Hence, he was seldom sick or if he did fall ill, he would almost always have a speedy recovery. We never thought that he would catch this infection, much less spread it to his sister.
So in finance, never assume that you will always see a higher stock price or better capital gains especially after a period of good run. This is even more relevant from 2009 to 2010. Thus, always be prepared for a change of tide, lock in profits and rebalance your portfolio regularly to ensure that you are in good shape to survive any crisis.
More importantly, it is wise to invest regularly than to try and time the market. That way, even if you are caught, you will be in a better position to battle another day.
Thirdly, divide and conquer. My wife says we will stop at two children and her logic is simple – daddy handles one child and mommy handles the other one. So when both children wake up in the middle of the night crying, we will just divide and conquer.
With our investments, we should do the same. Whether asset prices move up or down, they generally do not move in identical magnitude or directions. Spread your assets across different risk spectrum and consider alternatives like real estate and commodities if you can afford to do so.
I feel comfortable speaking about investing concepts and principles. For readers who may be regular followers of this column and took some of the investment advice I shared, you may have started a monthly investment plan where one invests in a diversified portfolio of equities, bonds and commodities, and would have done well in the last two to three years.
Hopefully more investors had listened and acted earlier though. That said, when it comes to parenting, I am a novice. I vow not to dismiss valuable advice and to take heed of them. The only wish I have now is a speedy recovery for my young daughter.
> Tay is senior vice-president and senior head of UOB’s personal financial services division.