Only 24, he has moved from forex trading to being an angel investor, with four start-ups under him
Angel investor Lim Kian Chun's mature demeanour disguises the fact that he is only 24.
Start-up founders power through meetings with him without even catching a whiff of his youth, and are surprised when they find out he is still in university.
Says the final-year law student at King's College London: "It helps that I look older than my age. They often don't find out until some time later."
Mr Lim has been angel investing for only a year with four start-ups under his wing, but his investing journey goes a long way back.
He learnt to grow his money through business as a teenager, selling T-Mobile Sidekick phones bought from the United States on eBay at 16, and even emerged runner-up in an OCBC Young Investors' challenge at 17.
"I realised not many people used eBay or e-commerce, it was a nascent industry.
"It was almost pure arbitrage as I could buy a cellphone for $400 and sell it for $800 on forums.
"I sold about 20 to 30 pieces. That was pretty lucrative and with some savings, that gave me the start-up capital I needed for foreign exchange (forex) trading."
He started with $10,000 when he was 18, and went bankrupt twice within the year, making mistakes such as averaging down too much and overleveraging.
It took about two years before he improved, and he has since developed a familiarity with markets.
Mr Lim says: "People think trading is very math-intensive, but you only need to understand it once.
"When you do, you can model everything."
After trading forex for a few years, the high-pressure activity forced him to re-evaluate the way he grew his money.
He recalls: "I had too many close calls like margin calls - that's probably the shortest two-word horror story for a trader.
"After a while, the stress and risk for total capital loss can get to you.
Worst and best bets
Q What has been your biggest investing mistake?
A When I finished national service in 2012, I invested $30,000 - my parents came up with half - with two other partners in a roast meat stall.
My friend was in Ipoh and had tried the roast meat there, saying it was the best thing he had ever eaten, so we got the chef to come here and tried it, and it was good.
We came up with $90,000 to open two stalls, and signed a pretty bad agreement with a food-court operator that was very restrictive. We did not know how tough the food and beverage business was.
I could have lost everything but I took only about a 40 per cent loss because I sold my stake to one partner.
It was the worst investment, not because of the sum lost, but because of how I made the investment. I did not do my due diligence, I did not know how the market worked, and to throw that kind of money away was almost like gambling.
After I sold my stake, I was still bound by a personal guarantee to fulfil the lease.
I did not know what it was and had blindly signed it.
The operator said I still had to pay the full sum owed under the lease, but my law studies came in useful, as I said they could easily find a new tenant and had a responsibility to mitigate the damages for breach.
Q And what has been your best investment move?
A It is not an investment per se, but my best trade was when I shorted spot gold (an instrument called XAU/USD) at the US$1,280 levels less than two weeks ago. I rode the trade all the way down to US$1,225 before squaring off my position.
When you consider that my position was leveraged, that came up to about a 25 per cent return on investment in 10 days.
"I did make money taking big risks. Eventually, I learnt you can win nine times, but you're going to be wiped out the 10th time.
"I learnt to be much more disciplined."
There's no escape from being disciplined in investing, says Mr Lim, and it stems from understanding your psyche and profile, which many fail to do so.
"Humans are very irrational, so a lot of these behavioural biases manifest themselves in our trading habits," Mr Lim says.
He understands his profile and style perfectly well. He adds: "I've the good fortune to be educated so if I lose my investments, I'll be fine.
"My parents were prescient as they said I'll have a safety net, and that has given me the kind of aggressiveness or drive to push my portfolio to more risky investments. But I can handle the risk."
Mr Lim has learnt the ropes of investing, studying theories such as the prospect theory which helped him to better understand himself.
He says: "You tend to hold onto a losing stock much longer than a winning stock. If you have this skewed risk-to-reward ratio, in the long run, you're going to lose money.
"I think averaging down positions is also something that kills people because they don't know how to trade in a bearish market, and it's the slow drain of this capital."
He considers paper losses as real losses, so the decision to close a trading position becomes rational and measured.
In some way, forex trading led Mr Lim to angel investing.
"I had the capital from forex trading, and I was thinking it was all well and good but I was not creating value... I was at a point where I wanted to take risks and grow something. That was the first step, and now my portfolio has mainly rebalanced to angel investing," he says.
This is also why Mr Lim set up private equity firm Six Cents Capital with a partner in March.
He says: "We consolidated all our investments under the company, and they have a total value of just under $1 million. By giving outside investors access to our current and future investments and our deal flow, we can use that as working capital to finance start-ups or small and medium-sized enterprises.
"Six Cents is a play on the term 'sixth sense' and is also based on the idea that we can leverage something small - cents - to build and finance great businesses."
Q Moneywise, what were your growing-up years like?
A My family was pretty well-off, but my parents were always strict about money.
My parents were born into poverty, so they always had a frugal mindset. The thing they hate the most is probably wastage. For instance, when I use a pen and don't finish the ink, they'll get upset.
I resented it a bit but later, it made me want to make my own money. As I grew into my teen years, they became more liberal with money. I've always had luxuries like holidays.
They are quite traditional and see school as a safety net, so they discouraged me from doing business until I grew more confident with my money.
Q How did you get interested in investing?
A My dad invests in complex products like accumulators and swaps, and he would explain them, which piqued my interest in investing.
I grew up in an environment where we could discuss such things at the dinner table.
I learnt that forex is something so pervasive that you do not even know how much it affects you, until you study currency movements and how the markets operate. It requires you to know politics, job data, inflation. It is a lot of work and the challenge got me interested.
It makes you think on a macro level, while stocks are contained, especially when you're studying the fundamentals of a company or taking a bottom-up approach.
Q Describe your investing strategy.
A I rely heavily on fundamental analysis to determine the future direction of currency pairs.
I spend about two to three hours a day reading the news and analysing economic indicators.
I am not a big fan of technical indicators, but they are useful for confirming trends, and a lot of market movement is not only due to ma- croeconomic factors, but also market sentiment and expectation.
I use price action analysis to inform my entry and exit levels and, in this regard, areas of support or resistance, relative strength index, daily high and lows and the simple moving average are very helpful .
More importantly, this strategy does not work for everyone. In a way, you have to develop your own system and it has to be grounded in sensible investing principles.
I am a firm believer that risk and leverage management is the most critical component of forex trading.
For angel investing, you cannot look at the fundamentals in the same way you do with stocks because a lot of the numbers are just projections.
I look at the management team and market fit when assessing an investment opportunity.
Q What's in your portfolio?
A I invested US$200,000 (S$276,000) in convertible bonds as seed funding for a private investment platform called Fundnel and, through it, I have $75,000 worth of shares in eFora, a multi-touch collaborative workspace.
Fundnel has raised over US$8 million for 11 deals in the last six months, while the firm that created eFora is in talks to bring this to industries such as logistics and maritime. I also invested $55,000 in Bottlefly, a table-booking app for clubs here, and it is doing quite well. It launched beta-testing in March, and has had five-figure sales.
I invested in these start-ups pre-money, so I do not have the figures for how much my investments are valued today.
My latest investment is in Two Pack Studios, a Web development and digital consulting agency with very radical ideas.
I have a fairly large amount in two forex brokerage accounts and a five-figure sum in an investment-linked plan with Manulife accumulated over three years.
The plan, which is on monthly automatic Giro payments, is a way for me to save.
Q What does investing mean to you?
A I have always heard "make your money work for you" when I was younger, or about the value of compound interest, and had the naive thinking that investing was easy money.
After a while, I realised it was actually hard work. It takes time and effort, and I realised I liked being financially literate.
Q What are your immediate investment plans?
A I am long on US equities at the moment as I believe we will see the Nasdaq and S&P 500 indices testing highs over the next few weeks.
Although I believe the US stock market is overvalued after years of quantitative easing and that a day of reckoning will come soon, part of being a trader is knowing how to profit from intermediate trends or cycles, even when your fundamental view lies in contrast to market sentiment.
I have an eye on the GBP/USD (British pound-US dollar pair), as I think that fears of Brexit are largely unfounded, and a smart position to take with good upside potential would be to buy call options on GBP/USD a week or two before the referendum.
Spot gold would also be an interesting trade to watch over the next few weeks. It has found major resistance at US$1,300 levels and is currently trading at US$1,112.
I believe we are going to see some sideways consolidation, and then an upward retracement in the next week before it resumes its next leg downwards.
Investors looking to get into gold positions may have an opportunity to buy dips under US$1,170 in the coming weeks.
In the medium term, I will keep doing what I am doing, trading and growing Six Cents as a company.
I want to focus on gaining experience and building the competency to handle the capital of outside investors.
Q Home is now...
A A three-bedroom rented apartment in London with two flatmates.
A version of this article appeared in the print edition of The Sunday Times on May 29, 2016, with the headline 'Age is just a number for money-smart law student'. Print Edition | Subscribe
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