A Rare Window into How We Invest

INVESTOR LETTER  ·   3 AUGUST 2026 

Something unusual happened in July. The strongest part of the global market became, for three weeks, the weakest. Semiconductor and AI-related shares, which had led equities for more than a year, fell hard and fast, and the selling reached from the United States to Korea, Japan and China within days.

When markets move like this, most commentary rushes to tell you what happened. We would rather use the moment differently. A sharp correction is one of the few occasions when an investment process becomes visible in real time: what an investment adviser does when prices fall reveals far more than what they say when prices rise. So this piece is less a market update than a window into how we think.

THE FACTS

The main semiconductor index fell more than 20% from its June peak. That sounds alarming until you remember where prices were coming from: the same index had roughly doubled over the previous twelve months, and some individual names had risen several hundred percent. After gains of that size, a sharp pullback is not a verdict on an industry. It is how markets digest very large advances. They always have.

But there is a stranger fact sitting underneath the headlines, and it shapes our entire reading of this correction: company profits went up while share prices went down. The selling was not triggered by bad news from the businesses themselves. During the very weeks their shares were falling, the world's leading chipmakers reported some of the strongest results in their history. One posted a quarterly profit among the largest any company has ever recorded. Another reported record revenue with its production fully booked for the year ahead, and its shares fell double digits in a single session anyway.

When excellent results meet falling prices, the business has not disappointed. Expectations had simply run ahead of even excellent results, helped along by a more hawkish central bank and a nervous mood. That is a valuation correction, not a fundamental one. The world's demand for computing did not fall in July. Only the prices did.

THE AMAZON STORY

Amazon's Tri-Cities expansion — building capacity ahead of demand.

Whenever spending on a new technology reaches historic scale, the word “bubble” appears. It deserves a serious answer, and the best answer we know is not an argument. It is a story most investors think they remember, but whose lesson is easy to forget.

Through the late 1990s and 2000s, Amazon poured every available dollar into fulfilment centres, logistics networks and, later, the data centres of its cloud business. Because it reinvested everything, it reported losses or razor-thin profits year after year. In 2000 alone it lost US$1.4 billion. Commentators called the spending reckless. Some called Amazon a bubble stock that would never earn real money. For nearly two decades, the sceptics appeared to be right.

Source: Amazon annual reports. Figures are approximate and shown for illustration.

Then the arithmetic turned. Once the network was built, each additional parcel and each additional cloud customer travelled over infrastructure that already existed. Spending fell relative to revenue, and profits inflected: from around US$600 million in 2015 to roughly US$59 billion by 2024, close to a hundredfold increase in under a decade. The share price followed the profits, as it eventually always does.

The investors who were rewarded were not the ones who avoided Amazon during its heavy-spending years. They were the ones who understood what the spending was building. The spending was never the problem. The spending was the moat: infrastructure so large and so efficient that no competitor could replicate it.

WHY WE BELIEVE TODAY RHYMES

Today, the largest technology companies are spending historic sums building AI computing capacity, and their share prices are being punished for it, just as Amazon's once was. The natural question is whether this time the money is chasing demand that will never arrive, as happened with telecom fibre around the year 2000.

Here is the difference, and in our view it is decisive: this time the demand is arriving first, and the capacity is chasing it. The clearest illustration came the same week the correction bottomed, when Alphabet reported that customers have already signed contracts worth more than half a trillion US dollars for cloud computing it has not yet been able to deliver. That figure is not a forecast, not a hope, and not an analyst's estimate. It is demand that exists on paper and simply waits for the capacity to be built. Across the industry, the same picture repeats: memory production sold out a year or more ahead, order books at record levels.

More than half a trillion dollars of signed cloud contracts — demand Alphabet cannot yet deliver, not a forecast of demand it hopes to find.

Bubbles are built on hope. This buildout is built on order books.

HOW WE INVEST THROUGH IT

None of this means prices cannot swing violently along the way. July proved they can, and there will be more months like it. What matters is whether a portfolio is built to withstand those swings without being forced into bad decisions. The portfolios we advise are, and in three deliberate ways.

We own both sides of the cheque. The technology giants write enormous cheques for AI infrastructure, and somebody receives them: the chipmakers, the memory producers, the equipment and supply chain behind them. We hold the cheque writers and the cheque receivers together, so we do not need to guess which single layer of the AI economy captures the most value. If value migrates from one layer to another, as it often does in technology, we participate either way.

We surround the growth engine with shock absorbers. The AI holdings sit inside a structure that also holds established compounders whose earnings do not depend on the AI trade at all, together with meaningful allocations to gold, bonds and cash. Each has a job: gold as insurance against inflation and geopolitical shocks, bonds for income and ballast, cash for the freedom to act when opportunity appears. A large part of the portfolio exists not to participate in the AI theme but to protect it. That is why a 20% correction is something we can study calmly rather than react to.

We decide in advance what would change our mind. Discipline is easy to claim and hard to verify, so we state our tests openly. We would reassess the AI allocation if cloud order books stopped growing, if the big spenders cut their plans because customer demand disappointed, if memory pricing rolled over because supply caught up, or if the returns on all this invested capital began to deteriorate rather than improve. In July, none of those things happened. Demand rose. Earnings rose. Order books rose. Prices fell. Price volatility alone is not a reason to abandon a thesis the underlying data keeps confirming.

CLOSING THOUGHTS

Corrections inside powerful long-term trends are uncomfortable, but they are the price of admission. Amazon's shareholders endured many of them on the way to extraordinary returns, and the ones who were rewarded were those who understood what the spending was building. We believe the same discipline applies today.

Long-term investing does not require complexity. It requires clarity about what you own, discipline about why you own it, and honesty about what would make you change your mind. We hope this letter has given you a genuine look at all three. If you would like to discuss how these ideas apply to your own plans, we encourage you to speak with your financial consultant.

AT A GLANCE ✦  July's correction was a valuation reset, not a fundamental one — chipmaker profits and order books rose even as prices fell. ✦  The Amazon precedent: heavy build-years are often mistaken for bubbles, but the investors rewarded were the ones who understood what the spending was building. ✦  We hold both sides of the AI value chain, surround it with gold, bonds, cash and non-AI compounders, and have stated in advance exactly what would change our mind.

With warm regards,

Unicorn InvesCo

 

NOTE AND SOURCE

Figures cited in this article are drawn from public sources including company earnings releases and earnings calls, Bloomberg, Reuters, CNBC, the Wall Street Journal, the Financial Times and FactSet, and reflect information available as at late July 2026. Chart figures are approximate and shown for illustration. This article is for information only and does not constitute investment advice or a recommendation of any security. Past performance is not indicative of future results.

Dear Investors,
In 2025, global stock prices rose. It felt great.
But what we witnessed in 2025 is the symptom of success, not the source of it. True success is found in the process—not the outcome—and the process is often arduous and unglamorous. In investing, winners learn to enjoy the process; failures fixate on outcomes.

The visible results we enjoyed in 2025 were shaped by decisions we made over the last few years—some planted even earlier.

A few examples of “process before outcome”
1) Chinese equities — planting seeds during the hard years
Chinese equities delivered a strong rebound in 2025. Yet the groundwork for that success was laid during the period when China was publicly deemed “uninvestable” by many prominent market participants—from mid-2021 to early-2024. The Hang Seng Index nearly
halved from its 2021 peak to its 2024 trough. After careful study, we concluded the drawdown was more likely a painful but temporary
phase—China was deleveraging and transitioning from a developing economy towards a more advanced one. We used the deep price correction to add Chinese equities into our portfolios.

For example, in November 2023, we decided to allocate an additional 15% of our Advised Funds Growth portfolio to Chinese equities. At the time, the news flow was negative and prices were depressed. It took fortitude to sow the seeds for a harvest that only became visible in 2025—and we did.

2) Gold — conviction that only becomes “obvious” later
We insisted on holding gold in our portfolios as early as November 2011, when Unicorn was founded, because we believe it is the ultimate safe-haven asset. Many of our investors entrust us with their core savings, so capital preservation and resilience have always been top priorities.

For most of our portfolios, gold forms around 10-20% of the allocation. Over the years, many friends in the asset management world criticize us saying that was “too much”—most conventional portfolios either hold no gold, or hold a token amount (often no more than 5%). In 2025, some of those same friends told us they would like to take back their words. That is how investing often works: the discipline looks unnecessary—until the day it is needed.

3) Copper and silver — risk management through margin of safety
Alongside gold, we have also studied copper miners and silver as potential opportunities, but have not implemented these ideas. Unlike gold (predominantly a monetary/precious metal), copper is largely tied to industrial production, and silver has significant industrial use as well—making both far more economically sensitive. Even in a normal slowdown, a 30–50% drawdown is not uncommon.

To preserve a margin of safety, we believe the best time to build exposure to these assets is typically after an economic slowdown, when prices already reflect stress. Until then, we are content to hold gold as our primary commodity proxy for hedging inflation shocks, geopolitical instability, and black-swan events.

We maintain a target allocation to precious metals. If we add silver or copper miners, it would likely be funded by reallocating from gold rather than increasing overall exposure. Given our early positioning in gold since 2016—the earliest point we could include gold in our managed portfolio (before that, we could only advise investors to buy gold themselves)—it has delivered a gain of more than 250%. This early strategic positioning allows us to stay prudent and patient, without needing to chase returns in silver or copper
miners.

The world today

We operate in a world shaped by powerful forces:

1. Heightened geopolitical tension
As global power dynamics shift, defence spending is rising, supply chains are being reconsidered, and uncertainty can surface abruptly. In such periods, safe-haven assets can provide a harbour when conditions turn ugly.

2. AI and robotics
Artificial Intelligence is still at an early stage. Together with robotics, it may reshape productivity, business models, and job markets. Many roles will be disrupted, many new ones will emerge—and over time, productivity gains can lift corporate profitability through higher efficiency and improved margins.

3. Global debt and the realities of fiat money
The world has become increasingly dependent on debt. In a fiat money system (money not backed by gold), policy choices matter immensely. As former Fed Chair Ben Bernanke once noted, governments ultimately have the ability to create currency. In practical terms, governments rarely tolerate deflation for long because deflation makes debt harder to service. This reality clarifies our long-term approach: we want exposure to assets that cannot be printed—and we want portfolios that can withstand multiple regimes (growth, recession, inflation, and shocks).

Our strategy for 2026

Macro backdrop: supportive, but returns may be more measured

2026 will likely be shaped by the policies of the world’s two largest economies: the US and China.

US: President Trump faces the mid-term election in November. With Republicans currently
controlling both the White House and Congress, he has strong incentive to keep the economy supported and voters confident. This points to a looser fiscal stance. He has also repeatedly called for lower interest rates. Rates have been trending down since end-2024, and we think this could accelerate after he potentially appoints a new Fed Chair in May.

China: China has already been running loose fiscal and monetary policies to stabilise growth, and this is likely to continue. Together, these policies should provide a tailwind to the global economy. However, the economy is only the environment where assets exist. What matters is asset value and pricing—and after several years of rising markets since late-2022, many assets are no longer cheap. Hence, we expect returns in 2026 to be more measured, with valuation discipline playing a bigger role.

AI: participate, but with risk controls

AI spending will likely continue in 2026 because companies can’t afford not to invest—they risk disruption and obsolescence. Over time, we believe this spending can translate into productivity gains and new revenue streams.

Many worry about an AI bubble. But bubbles are irrational, and timing the peak is futile. A bubble is usually clear only after it bursts—and the biggest gains often come near the end. That is why being early is often indistinguishable from being wrong. History is a good reminder. During the Dot-com boom, Alan Greenspan warned of “irrational exuberance” in December 1996. The market only crashed in March 2000—and the Nasdaq surged 300% in the years in between.

So we focus on what we can control:
1. Keep AI exposure within 15%.
2. Rebalance—harvest gains as prices rise and redirect into gold, bonds, and other quality companies.
This way, we participate if AI continues to run, while staying protected if the cycle reverses.

Key risk: inflation returning

The main risk to 2026 is the re-acceleration of inflation—driven by stimulative policies and large-scale investment cycles (including AI infrastructure). Inflation can be disruptive because it can pressure both equity and bond valuations simultaneously, as we witnessed in
2022.

Portfolio positioning

In summary, our approach in 2026 is:
1. Main asset allocation: stay the course, with comprehensive hedging

A conventional portfolio often hedges equities primarily with bonds (especially longer-dated bonds). We believe that is incomplete. Bonds hedge recession risk reasonably well, but in inflationary regimes, equities and bonds can fall together, like we witnessed in 2022-2023. We will continue to manage drawdown risk more comprehensively—using both precious metals and bonds alongside diversified
equity exposure.

2. Sub-asset allocation: quality at reasonable prices, with greater emphasis on valuation

We remain committed to buying quality assets at reasonable prices. That discipline is the best long-term insurance against permanent capital loss. What worked in 2025 can still work in 2026—but valuation matters more now because many assets are no longer cheap.

A personal note on your wealth plan

What I have shared above relates to portfolio strategy. At a personal wealth management
level, I encourage you to:

1. Meet your Family Wealth Consultant to revisit your profile and ensure your portfolios still fit your goals and life stage.

2. Revisit the strategies you put in place (such as the 3-Bags Strategy and any Regular Savings Plans) to confirm they remain suitable for you.

3. Keep learning consistently – A sound strategy alone is not enough for investment success. It must be matched with the emotional discipline to stay the course through inevitable market cycles. That discipline is not inborn—it is cultivated over time through continual learning and the steady growth of financial wisdom.

Success in investing does not belong to those who always forecast correctly or always pick the best stocks—because such people do not exist. It belongs to those with a sound intellectual framework and the emotional discipline to follow it.

At Unicorn, we will continue to earn your trust through rigorous research, disciplined risk management, and a commitment to keep learning and improving—together with you.
Wishing you a joyful and prosperous New Year.

Warm regards,
Seow Kek Wee
Chief Investment Officer
Unicorn Financial Solutions

Disclaimer and Important Notice

The information herein is published by Unicorn Financial Solutions Pte. Limited (“Unicorn”)
and is for information only. This publication is intended for Unicorn and its clients or prospective clients to whom it has been delivered and may not be reproduced or transmitted to any other person without the prior permission of Unicorn. The information and opinions
contained in this publication have been obtained from sources believed to be reliable but Unicorn does not make any representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to
change without notice. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. Unicorn accepts no liability whatsoever for any direct indirect or consequential losses or damages
arising from or in connection with the use or reliance of this publication or its contents. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. Unicorn does not accept liability for any errors or omissions in the contents of this publication, which
may arise as a result of electronic transmission.

Unicorn Financial Solutions Pte. Limited is a Licensed Financial Adviser and Accredited/Institutional Licensed Fund Management Company.

Source: Flickr

You have probably heard the story of the Three Little Pigs. The first pig built his house of straw, the second of sticks, and the third of bricks. Then came the Big Bad Wolf, who blew the first two houses down with ease. Luckily, the first two pigs took refuge with the third, whose brick house stood firm despite the wolf’s huffing and puffing.

But wait — isn’t this supposed to be an article about investing?

Exactly.

Stories often carry powerful lessons, and this one is no exception. The brick house survived because it was built on a solid foundation — a strong framework.

Merriam-Webster defines framework as “the basic structure of something: a set of ideas or facts that provide support¹.” When a framework is robust and well-designed, it provides safety, stability, and peace of mind.

The same is true for investing. A sound investment framework helps you weather market storms and reduces the emotional rollercoaster that volatility can bring.

Warren Buffett, arguably the world’s greatest investor, once said:

“To invest successfully over a lifetime doesn’t require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions — and the ability to keep emotions from corroding that framework².”

This kind of framework is more important than ever in today’s fast-moving, noisy investment environment. News headlines can swing your emotions wildly from one day to the next. A well-structured plan helps you stay grounded, confident, and focused on what truly matters.

At Unicorn, we call our framework The Three Bags Strategy. As the name suggests, you divide your funds into three distinct “bags,” each serving a specific purpose.

Bag 1: The Contingency Fund

This is your financial safety net — the cash you set aside to cover emergencies and unexpected events. It should be large enough to support you and your family during difficult times so you do not have to liquidate investments at a loss.

For example, during the 2008 sub-prime crisis, retrenchments were common. Those without adequate emergency funds were forced to sell investments — often at depressed prices — just to cover daily expenses.

The size of your contingency fund varies from person to person, and keeping too much cash can also hurt your long-term returns. A professional financial consultant can help you strike the right balance.

Bag 2: The Invested Fund

Inflation never sleeps. Simply parking your money in the bank is no longer enough to keep pace with rising costs. This second bag is where your money works for you — carefully invested in well-researched, valuable assets.

At Unicorn, we actively look for high-quality assets trading at attractive prices — the kind of opportunities value investors like Warren Buffett love. Strategic asset allocation plays a crucial role here.

For instance, in 2009, we advised investors to allocate up to 30% of their portfolios into U.S. equities, which had been heavily battered during the sub-prime crisis. Many investors stayed on the sidelines, but those who followed our advice saw their portfolios grow significantly — the S&P 500 rose nearly 80% before we advised taking profits in 2013³.

This bag is also perfect for Dollar Cost Averaging (DCA) — consistently investing a fixed amount at regular intervals (e.g., monthly). When markets dip, your money buys more shares; when markets rise, you buy fewer. This discipline takes emotions out of the equation and builds your portfolio steadily over time.

Bag 3: The Value Cost Averaging (VCA) Fund

Warren Buffett’s famous advice is to “be greedy when others are fearful and fearful when others are greedy⁴.” Markets often fall because investors panic, creating opportunities for those with cash ready to deploy.

This third bag is your “opportunity fund.” It allows you to take advantage of underpriced assets during market corrections — without touching your contingency fund.

For example, in 2016, we activated this bag and recommended that our investors buy gold after its price had fallen from its 2011 peak³. Our analysis suggested that volatility and uncertainty were likely to rise, and gold typically performs well in such environments. That call turned out even better than we expected as gold prices surged in the years that followed.

Putting the Framework to Work

Together, these three bags form a simple yet powerful framework that removes the guesswork from investing. Your first step should be to work with a trusted family wealth consultant to establish these foundations before — or as — you begin your investment journey.

The next step is to choose the right advisor. Your consultant should have the skill and discipline to select the right assets and guide you through good times and bad.

At Unicorn, we take pride in aligning our interests with yours. We remain vigilant, proactive, and transparent — keeping you informed not just when times are good, but especially during market turbulence. Because when your framework is solid, you can focus on building a future you and your family can feel secure about.

Source

1 – Merriam-Webster 

http://www.merriam-webster.com/dictionary/framework

2 – The Intelligent Investor

3 – Bloomberg

4 – Investopedia

Warren Buffett: Be FearFul When Others Are Greedy https://www.investopedia.com/articles/investing/012116/warren-buffett-be-fearful-when-others-are-greedy.asp

Source: CartoonStock

Would you be open to engaging a portfolio adviser who only earns when your portfolio does well?”

That is exactly what you get when you invest with Unicorn.

Such a fee structure is almost unheard of in today’s financial industry. For investors, it should be comforting to know that such a portfolio adviser exists — right here in Singapore. This is the kind of set-up that investors, both locally and globally, have been yearning for. Most portfolio advisers scoff at the very suggestion of it.

Unicorn currently offers this performance-based service through:

• Unicorn Securities – Minimum investment: S$250,000

Investors’ Problem with Portfolio Advisers

US$100 billion — that’s the staggering amount Warren Buffett estimated that pension funds, endowments, and wealthy individuals lost between 2001–2010 to hedge funds and other managers who charge sky-high fees.¹

At first glance, Buffett may seem to be discouraging investors from using portfolio advisers at all. But that’s a misunderstanding. Buffett’s real contention is not with the use of managers — after all, Berkshire Hathaway essentially functions as a fund — but with managers who charge high fees and fail to deliver outperformance.1

Unfortunately, many investors took Buffett’s remarks as a cue to complain about any and all fees, calling them “gross” and “unjustified.”

But here’s the reality: paying more does not always guarantee superior results — and nowhere is this truer than in investing.

Would a Berkshire Hathaway shareholder complain about paying Buffett high fees, knowing the extraordinary returns he has generated? Hardly. A simple estimate of a US$1,000 investment in Berkshire in 1964 is worth about US$28 million today.²

What Should Investors Do?

Instead of obsessing over the absolute amount of fees, look at the fee structure. It reveals much about a portfolio adviser’s motivations and alignment with you.

Imagine this scenario:

You are a shareholder of a struggling company seeking a new CEO to turn things around. One candidate proposes:

• No pay until the company becomes profitable
• 20–30% share of profits thereafter

What does this tell you?

1. Alignment of Interests – He is literally in the same boat as you. You pay only when there is performance.
2. Confidence – Only someone sure of their ability would accept such a challenge.
3. Desire to Succeed – As Napoleon Hill said:

“When a man really desires a thing so deeply that he is willing to stake his entire fortune on a single turn of the wheel in order to get it, he is sure to win.”

Apple’s legendary CEO Steve Jobs did just that. When he returned to Apple in 1997, he revitalised the company — while drawing an annual salary of just US$1, relying instead on stock options tied to performance.³

Conclusion

Finding a good portfolio adviser or wealth planner is critical to your financial success. But don’t just look at performance numbers — scrutinise how they charge.

A fee structure is like a microscope: it magnifies who the manager really is, what they stand for, and whether they are truly on your side.

When you find a manager who is willing to bet on themselves — to win only when you win — you may have found the “good shepherd” who will grow your flock.

And when you do, remember: quality comes with a price — but a high price does not always mean quality.

Source

1 – Warren Buffett rails against fee-hungry Wall Street Managers https://www.reuters.com/article/world/uk/warren-buffett-rails-against-fee-hungry-wall-street-managers-idUSKBN1640FF/

2 – Deep Seek (How much is a US$1,000 investment in Berkshire in 1964 worth today)

3 – Steve Jobs Still Makes a $1 Salary

http://techland.time.com/2011/01/12/steve-jobs-still-makes-a-1-salary/

Q1: Tell me more about yourself.

I am Kek Wee, Head of Investment Research with Unicorn Financial Solutions, and I have been with Unicorn for 16 years.

I work with investment portfolio managers and analysts on macroeconomic and securities analysis to construct portfolios for our clients. Together with my team, I train the financial consultants in Unicorn so they can articulate our investment philosophy and investment views to their clients, and I ensure we constantly communicate to our clients through seminars, videos, and publications. I feel fulfilled when I know our investment team is constantly progressing to take good care of our trusted clients.

Other than my work, I enjoy the simple pleasure of jogging and meditating, which brings me peace and mindfulness.

Q2: How did you start taking an interest in investing and growing wealth?

Actually, I started my financial planning in 2001. That was when I graduated from NTU. And the reason was, when I was young, I always saw my parents having conflicts over money. And I thought, “Maybe we were poor?” So, I was very thrifty. I was very conscious about saving money. That is when I have a plan which was, I did not want to have money problems. I wanted to plan to receive a recurring income of $5,000 every month by 37 years old.

So, I did my math: To receive a monthly recurring income of $5,000 by saving in the bank that gave me 1% interest annually, how much capital did I need? The answer was $6 million. Either I will never get there, or I will only get there when I am 60 or 70 years old. That is not an attractive prospect! Well, what if I switched it around? To get a 6% return with $1 million of capital. That, to me, is highly achievable early in my life. So, I did my projection and started working towards it.

Q3: This seems like the start of your financial planning journey and eventually finding your home at Unicorn.

I saw how beneficial this concept was for me and started to share it with my friends. There was a story which involved my junior college friend, now one of my clients. In 2004, he thought my concept was good, but he was hesitant because he did not know how to invest. What he did was put $30,000 with me, and I helped him invest it.

In 2006, I met him again. He was getting married, but he looked very worried because he had to pay for his wedding and HDB, plus renovations. The expenditure and his account were a total mismatch. However, I reminded him that the money he once placed with me had grown to $50,000. I saw his eyes lit up!

I never want to work for money. I want to enjoy my work. When I saw my friend’s eyes lit up, I thought how wonderful that would be if I could help people while helping myself. Back then, I did not know about this profession (financial planner) and hence aspired to help people do financial planning on a pro bono basis when I was 37 years old and financially independent.

It was at the end of 2006 that one of my previous colleagues from PwC recommended me to Unicorn. After sharing for five minutes, I knew I wanted to join Unicorn. And that is my journey!

Q4: What are the fundamental values towards investing that guides you?

Some of the fundamental values that guide my investment are:

• Know fully why I invest in something. This gives me the confidence to make the right decision when the price doesn’t go my way in the near term. For example, in 2008, the share price of Fraser Centrepoint Trust, a well-known Real Estate Investment Trust with Causeway Point, North Point and Anchor Point in their property portfolio, declined 60% from $1.42 to $0.57. I took a trip to Causeway Point and North Point to understand the businesses of those malls. I observed these malls have business as usual, with good customer traffic and almost full occupancy. Hence, instead of panicking and selling, I invested more when the share price was around $0.60. Within a year, the share price went back to its initial price of $1.42. I had a capital gain of 140% in a year and a double-digit annual dividend yield.
• Have a framework and obey it. Investing is an emotional activity; hence I need a framework to reduce making emotional decisions. When the market is greedy, I am happy to sit on cash over an extended period. When the market is fearful, I progressively invest instead of waiting to buy at the market bottom. This is what I am currently doing in the current bear market!
• Play my own game. Investing is a journey, not a competition. I plan my investment to achieve my desired returns to fulfil my own life goals, not to beat others in investment returns. This allows me to stay clear of speculative craze, which could temporarily earn supernormal returns. Hence, I have never invested in things like cryptocurrency, NFTs and SPACs.

Q5: Perhaps you can help the readers understand value investing.

Value investing is about valuing an asset and then buying it at a price below that value. The value of a productive asset is made up of its stream of net cash inflows over its lifetime, discounted back to present value. In the case of equities investing, it requires us to look into the future of the company to determine the growth and duration of its cash flows, which requires a deep understanding of its businesses. The price, on the other hand, is its publicly quoted share price. At times, there can be a dislocation between the price and value of a company. However, I observed that over a longer period, the price and value of a company tend to converge, meaning that the growth of the company’s share price mimics the growth of its cash flows or earnings.

Warren Buffett once shared that investors in the public market have a fundamental advantage over the investors in the private market because there are periods when the prices of businesses are sold substantially below their intrinsic value due to irrational fear in the market. They are hence able to buy those businesses at significant discounts to their value that are never available in the private markets. However, most investors turned their fundamental advantage into a disadvantage by being sellers instead of buyers during these periods of stock market decline. I think the reason is that most investors do not fully understand the businesses they are investing in. Without knowing the value of the businesses, it is easy to succumb to the fear of a stock market downturn and sell when everyone else is selling.

Q6: What are the pros of value investing? What sacrifices must be made?

The first pro is the probability of success. It is based on knowing the value (of the company), and this knowledge has real substance. Let us say (the company) is worth $1mil, and I attempt to buy at $0.5 mil, which at times might present itself due to market fluctuations. Buying at a substantial discount compared to its worth significantly increases my probability of investment success while reducing my investment risk. However, most people do not know the value; they only know the price. There is a saying by Mark Twain: “People know the price of everything and the value of nothing.” In times of crisis, prices can drop extremely low, but that is the basic advantage of value investing.

Secondly, having a high level of confidence. If I know it is (the company) worth a million, I am less likely to be shaken. For example, I bought it at $800k, and the price dropped to half a million, but because I recognise its value, hence I bought into that company. Versus if I invested in something more of a hype, I probably would not have that much confidence as I am unable to base it on something that can be computed.

Thirdly, value investing requires less time to monitor the investment Unlike the share price which fluctuates every day, the dynamics (hence the value) of a good business change very slowly. For example, Coca-Cola, because of its strong brand, can grow its profits year after year by selling more cans of Coke and raising its prices. When their costs increase, they can pass them on to their customers due to brand loyalty, hence protecting their profits. So long as the brand remains strong, its business dynamics remain intact. As such, my only investment of time is to read their quarterly financial reports to ensure the company’s profitability stays on track and read the news to uncover any major changes.

The first price to pay is the patience to hold on to the investment until the value and price converge.

Secondly, it requires effort and time for the initial research to understand the industry, business dynamics, financials, and valuation of the company. Even though I am now experienced in securities selection, it still takes me several days of in-depth research to gain a good understanding of the company before I am willing to invest in it. Most people who don’t enjoy the process may find it a chore. Hence, I often encourage people who do not have an interest in investment research to partner with a professional so he can do the research for them. Forcing ourselves to do something we have absolutely no interest in is a downgrade in our living standard.

Over time, successful value investing should bring about a multiple-fold increase in value. Think of The Rule of 72. If I find a company that is growing fast, say, at 10% a year. Every seven years, the value will double; every 14 years, the growth will be four times. We can just grow with the company without the need to keep switching in and out.

Q7: What are the actionable steps you can recommend?

The first step is to invest in yourself. This can be done by reading the books of investors who have been successfully investing for decades over market cycles, with proven results and philosophies you can identify with.

You can also attend courses by investors who have practical experience and proven results to learn from them how they select their investments and navigate market cycles. Unicorn currently offers a course to learn about the fundamentals of value investing. It is conducted by seasoned practitioners who are experienced investors and fund managers.

Lastly, if you think that DIY research is not your cup of tea, carefully selecting the right professional partner to outsource your research work can be very profitable and enjoyable.

Q8: We are currently in a high inflation period possibly leading into recession, how can value investing help the readers and what should one be doing stay invested?

Firstly, it is not possible to time the market accurately. Hence, I recommend a dollar-cost-averaging strategy once the valuation of the market is reasonable. I tracked the 3 biggest bear markets since World War II, and dollar-cost-averaging over the entire bear market (from peak to trough and back to peak) can yield a high single-digit or double-digit annualized return. This strategy keeps emotion at bay and ensures we do not risk missing the opportunity created by the stock market decline. Of course, we can also keep some cash to invest more when the stock market decline considerably.

Secondly, not all assets will revert to their initial price. It is important to have a proper framework to choose high qualities of securities that are fundamentally intact by inflation. Especially important in an inflation period is to choose companies with pricing power and low capital reinvestment needs. Financial planning will be valuable in giving you the personalised strategy to benefit from the bear market caused by the current high inflation.

What would be your response when you’re informed that an investment has no risk?

Would you have gladly gone ahead with the investment, delirious that you’ve found a “gem”; or very curious about what’s behind the product that was marketed as “no risk”?

Patrick Tan, Unicorn’s Chairman, who heads Unicorn’s Investing Committee, believes in being a steward of the wealth that investors have placed with Unicorn, and he was not satisfied with such a reply.

Lehman Brothers Minibond Notes

To reciprocate investors’ trust and confidence, he exercised due diligence and investigated the Lehman Brothers Minibond Notes with a supposed dividend yield that was advertised as more than 4%. “For each of these products, the investor was paid a regular stream of interest/coupon until maturity, at which point the investor was entitled to a redemption amount as described in the terms and conditions of the product. Pegged to considerably higher interest rates than fixed deposit rates, the notes were eagerly taken up by investors¹.”

What our Chairman discovered were that “with multiple risk exposure(s), there was no guarantee that investors would get back their principal when the notes were redeemed, either upon or before maturity. (Lehman Brothers) was also the swap counterparty, which meant that its collapse would cause the notes to default on their scheduled interest payments. This would, in turn, lead to an early redemption of the notes and liquidation of the underlying assets¹.”

The next course of action he took was to cease all applications to the product from his team with no exceptions as he had deemed the risk to be too high – “no risk is the biggest risk”, he cautioned.

Our Executive Committee (from left): Kevin Wilkinson (Non-Executive Director), Chua Hui Xin, Patrick Tan, Robin Tan

We could probably all agree that everything comes with risks. If something is too good to be true – it is likely that it isn’t real, or comes with very, very high risk.

Besides being shrewd, our Chairman also shares insights so that it becomes easy to understand the background behind money and why we must invest to accumulate wealth.

Nixon Shock

The money that we use right now is called fiat money, that is, it doesn’t have intrinsic value, and it only has value because a government guarantees it or because the different parties exchanging it agree on its value².

You might ask – hasn’t it always been this way? What’s the concern?

The price of one troy ounce of gold was pegged to US$35 before 19712. However, money was decoupled from gold after that by then US President, Richard Nixon. The dollar plunged by a third during the 1970s². After 1971, “the Federal Reserve (Fed) is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond to actual or threatened recessions by pumping in money,” explained economist Paul Krugman.

It sounds divine to simply print money, but there are always consequences.

Our Chairman wisely described it thus: the current stock market is like a heavy-set Lamborghini sports car, and yet a small stone could derail it when it’s running at 300km/h.

A relatively light Toyota sedan, however, wouldn’t overturn encountering the same stone on the road as it’s only running at 90km/h.

The current stock market can be compared to a person with a credit card, instead of a debit card. For someone who’s been spending indiscriminately, it’s very easy to upend him or her when a crisis hits; like a speeding sports car encountering a tiny stone. “When the Fed prints money, gold-standard advocates say, it cheapens the value of a dollar, promotes inflation, and effectively steals money from the citizenry³.”

This has led to money behaving quite differently from in the past when it enriched the hardworking. Now, it exacerbates the transference of wealth from the poor to the rich instead. The rich could easily borrow to buy assets to create more wealth. However, the poor may not have the means to borrow and create such wealth, and continues to exchange time for money, which would never outrun the leverage created by wealth grown from investing.

As he advocated “building one’s success on rock, not sand”, our Chairman role-modelled investing in assets steadily to build the Unicorn we have today.

Unicorn was established in 2011 by our Chairman with Kevin Wilkinson, Robin Tan and Chua Hui Xin, with the clear purpose to provide investors with authentic, personalised and holistic financial plans which also include the element of investment advice customised to our investors’ needs. This team continues to steer the company today with the exact same clear purpose and understanding that each one of our investors requires dedicated, unique and individual care, because YOU are a treasured member of the Unicorn family.

We look forward to serving you and your loved ones for a lifetime.

References:
1. Singapore Infopedia | 2. Wikipedia | 3. The Week

Important Notice

The information herein is published by Unicorn Financial Solutions Pte. Limited. (“Unicorn”) and is for information only. This publication is intended for Unicorn and its clients or prospective clients to whom it has been delivered and may not be reproduced or transmitted to any other person without the prior permission of Unicorn. The information and opinions contained in this publication has been obtained from sources believed to be reliable but Unicorn does not makes any representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to change without notice. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. Unicorn accepts no liability whatsoever for any direct indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. Unicorn does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission.

Unicorn Financial Solutions Pte. Limited Reg. No.: 200501540R

“That’s a nice car! How much did you pay for it? I’m sure it’s expensive!”
“I can see you spent quite a bit on that new watch of yours, are you sure it’s worth the price?”

How often do we get into conversations like these with regards to our purchases? More often than not, the focus of the conversation will be on the price of the object. So then, what does value mean? To answer this question, let us look at what Warren Buffet has to say.

“Price is what you pay. Value is what you get”

Let’s take a minute to digest the phrase. Has it helped in your understanding between price and value already? In our consumer and credit society, we are constantly bogged down by prices in our daily life. Every physical and material aspect of our daily life has a price attached to it — food, transport, entertainment, etc — and it is no wonder that most people don’t see beyond the price of things other than just coming up with the money required to pay for it.

Simply stated, price does not necessarily equate to value. Something which is purchased cheaply doesn’t mean it has good value and something which has been bought expensively doesn’t mean it has bad value. It all boils down to what value means to us.

For example, collectors of luxury timepieces would gladly pay the price of these items if they are ever discounted. Even if it amounts up to tens of thousands of dollars, they would still consider it cheap compared to its original selling price. This is because they see the value in them. Likewise, people who are only looking at purchasing a watch for the basic purpose of telling the time would think that this category of watches is crazily expensive!

How then have we been able to leverage on the concept of price and value in our investment planning strategies? Let’s refer to some of our past investment calls we’ve made. (Refer to Unicorn 1200 30th July 2013)

In January 2007, our Investment Committee added gold as an asset class to our portfolio. At the time when we made the call, gold was about US$640 per ounce.

How often do we get into conversations like these with regards to our purchases? More often than not, the focus of the conversation will be on the price of the object. So then, what does value mean? To answer this question, let us look at what Warren Buffet has to say.

Past performance is not necessary indicative of future performance. http://www.kitco.com/charts/livegold.html

Despite the price of gold rising from 2001 till 2007, why did we still include it as part of our asset class? Was it because of the cheap price? Definitely not because the price shows that it’s more expensive compared to a few years back. Rather, it was the value of using gold as a safe haven during a crisis that resulted in the purchase. As of end-May 2015, gold price is now around US$1,190per ounce.

Another similar example would be in September 2008 when we allocated 30% of our clients’ investment portfolio to China equities. The Shanghai Composite Index was about 2,293 points.

Past performance is not necessary indicative of future performance. https://sg.finance.yahoo.com/echarts?s=000001.SS#symbol=000001.SS;range=1d

As we can see, the index has fallen by almost 65% then! When a person uses price as the arbiter, economic sentiments coupled with the rapidly falling price was more than enough to scare most investors away from China. However, the value again was in China’s long-term growth story, which we felt were intact and attractive, therefore we went about with the allocation. As of end May 2015, the Shanghai Composite Index is around 4,611 points.

Very often, the value of a good asset is very stable and appreciates consistently over time. However, the price of the same asset could be fluctuating wildly day to day, even second to second. When a person uses price as the determinant of value, he will make decisions based on an illusion, thinking that he has got richer or poorer because the price has moved. He will have no yardstick to make a decision, but rather, he has allowed his emotions (and consequently wealth) to sway wildly with the prices of his assets. However, when one can see the value of what he has invested in, he will have a very clear yardstick to make a decision and hence consistently profit from his investments.

Price has no meaning on its own. It only gets its meaning when measured against value. This concept is simple but not easy. When you can truly grasp it, it can make you very wealthy.

Reflections

What are some of the purchases you have made recently which you felt was bought at an attractive price but others felt was expensive?
What value did you see in these purchases that caused you to feel that it was bought cheaply?
Have others opinion that your purchase was expensive caused you to start doubting the value of your purchase?
How can you apply your understanding of the first 3 questions to your own investment planning?
Since value is such a critical success factor in investing, how do you go about deciding the value of your investment?
Prelude to next article: Differently Differen

1. I’m leaving you because you know the price of everything and the value of nothing.”
https://www.cartoonstock.com/directory/t/tightfisted.asp

Disclaimer and Important Notice

The information herein is published by Unicorn Financial Solutions Pte Ltd. (“Unicorn”) and is for information only. This publication is intended for Unicorn and its clients or prospective clients to whom it has been delivered and may not be reproduced, transmitted or communicated to any other person without the prior written permission of Unicorn. This publication is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the s3 to subscribe to or enter into, for cash or other consideration, any transaction, and should not be viewed as such. This publication is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations and is not to be taken in substitution for the exercise of judgment by the reader, who should obtain separate legal or financial advice. The information and opinions contained in this publication has been obtained from sources believed to be reliable but Unicorn does not makes any representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose. Opinions and estimates are subject to change without notice. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment. Unicorn accepts no liability whatsoever for any direct indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission.

Unicorn Financial Solutions Pte. Limited Reg. No.: 200501540R

Certified Advanced Financial Planner (CAFP)

The CAFP designation represents a mark of distinction earned by a select few within our firm who have demonstrated exceptional technical proficiency, strategic thinking, and commitment to investor success.

Out of the hundreds of professionals trained over the years, only three have attained this rigorous certification—testament to the high standards and deep expertise required. CAFPs are often called upon by fellow practitioners across the firm to support key investor engagements, where they conduct in-depth financial diagnostics and develop tailor-made blueprints with solutions that are both precise and easy for investors to embrace.

In addition to their advisory role, CAFPs also lead the development of internal training curriculum, and set a strong example through the way they run their professional practices.

The CAFP designation is not an exam-based certification—it is a recognition earned through real, on-the-ground experience. It affirms those who have consistently walked alongside investors, helping them navigate complex financial challenges with clarity and care. More than a title, it’s a validation of meaningful impact, earned through mileage, not just modules.