Feb 22, 2009

me & money

Big investor but frugal spender

Adam Khoo Learning Technologies founder influenced by frugal dad to build own wealth

By Lorna Tan, Finance Correspondent

Despite being a multimillionaire, entrepreneur-cum-motivational speaker, Adam Khoo still hesitates before spending on consumer products like his iPhone.

However, when it comes to investments, the founder of Adam Khoo Learning Technologies Group wouldn't even think twice when investing, say, $50,000 in stocks. This is because stocks are expected to potentially generate more money, he says.

A conservative and long-term investor, he prefers to invest in cash-rich, large-cap companies that have low debts and the potential to consistently increase their earnings.

His group, which focuses on education, comprises 16 firms in seven countries with an annual turnover of $15 million. He also took over his father's advertising firm, Adcom, in 1999.

A business administration degree holder from the National University of Singapore, Mr Khoo - who is all of 34 - is also known for his motivational books. Last month, he launched his ninth book, Profit From Panic, which gives practical tips on how to deal with the current economic crisis.

He is married to Ms Sally Ong, 38, who is a director at one of his firms. The couple have two daughters - Kelly, five, and Samantha, three.

Q: Are you a saver or spender?

One of the factors that helped me build up my wealth over the years is that I am relatively frugal.

I have always saved at least 50 per cent of my income and I don't believe in spending a lot of money on luxuries. I buy clothes once a year only when I'm in Bangkok or Indonesia. Usually I visit a shop for half an hour and pick up 10 shirts and trousers at one go. I am a person of simple taste, except when it comes to cars. I like fast cars.

I invest 100 per cent of my savings consistently. But when the market gets too overvalued, I hold a larger proportion in cash as a precautionary measure.

Q: How much do you charge to your credit cards each month?

I have three credit cards but I use only one regularly for my personal expenditure. I chalk up about $2,000 to $3,000 every month. I use my credit card instead of cash whenever I can for easy tracking purposes. I withdraw about $200 from the ATM each time.

I pay my credit card bill every month and if I get charged 10 cents for late payment interest, I will scream. I don't believe in paying the annual fee too and will ask the bank to waive it.

Q: What financial planning have you done for yourself?

My portfolio, which I manage myself, is made up of the following investments: property that I rent out, private businesses, Singapore stocks, US stocks and exchange- traded funds (ETFs). My investments have generated an average return of over 20 per cent per annum.

Currently, I have about US$400,000 (S$611,000) in US stocks, such as Boeing, Google, Nike, Pepsico, and ETFs, and another $400,000 in Singapore stocks, such as CapitaLand, OCBC Bank, the Singapore Stock Exchange, Bestworld and STI ETF.

When it comes to insurance, I believe in buying term and investing the rest. Still, I bought seven traditional plans such as whole life and endowment when I was young, because my wife is a former AIA agent and I had bought them from her. About four years ago, I bought a term with cover of $1 million which brings my total life cover to about $2 million.

Q: What property do you own?

In 1998, I bought a 1,300 sq ft condominium in East Coast for $480,000 and rented it out for about $3,000. I sold it for $650,000 in 2004.

I also have a 5,000 sq ft semi- detached house in East Coast which was bought four years ago for $1.3 million.

Early last year, I bought a 900 sq ft condo at Robertson Quay for $1.3 million. I'm renting it out at $4,000.

Q: Moneywise, what were your growing-up years like?

I come from a wealthy family where my father and uncles are savvy business people and investors. That background influenced my values, beliefs and attitudes towards the possibility of building immense wealth when one is prepared to work hard and educate oneself.

My father started his advertising firm Adcom in 1972 and mum was editor of the women's magazine, Her World. I was the only child. We lived in a bungalow in Changi.

However, what gave me the drive to build my own wealth and to value money is that my father is an extremely frugal man, and that rubbed off a lot on me. In those days, my dad would not even buy a brand-new car despite his wealth. He would compare prices of toilet paper and toothpaste all over the supermarket before deciding what to buy.

Q: How did you get interested in investing?

Every Chinese New Year, from the time I was 15, my grandfather would give me hongbao with cash plus Malaysian shares like Genting, Kuantan Flour Mill and Hicom.

When I was in the army, I started dabbling in shares.

At about that time, I was inspired by a book I read, Buffetology, based on the success and work of Warren Buffett. I was amazed by a man who was able to build his wealth purely through investing.

Q: What's the most extravagant thing you have bought?

A $230,000 red Lotus bought last October. It's a reward for myself.

Q: What's your retirement plan?

My passive income from book royalties, dividends and business profits is enough to cover my expenses so, technically, I can stop working if I really wanted to.

Q: Home now is...?

I live in the semi-detached house in East Coast.

Q: I drive...?

A red Lotus Elise and a red BMW convertible.

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Mr Khoo with his newly launched book, His motivational books are an integral part of his education business, which he sees as his best investment. -- PHOTO: BERITA HARIAN

Q: What's your worst investment?

In my early 20s, I had no idea what made a good investment.

I bought stocks just because their absolute price looked cheap, not knowing what the company was really worth.

My worst investment was in Singapore-listed construction company L&M.

When the price was 3 cents, I thought it was too cheap to go lower. Later, it went down to 2 cents and I bought even more.

It later went down to 1 cent and half- cent and it was subsequently suspended. I lost over $30,000.

All this happened in 1995.

I started being more diligent in reading about stock trading.

Before that, I treated the stock market like a casino.

Q: What's your best investment?

My best investment is in my education business, Adam Khoo Learning Technologies Group.

I started it with two partners in December 2002 with zero financial investment on my part.

The $8,000 that we used to get started was put in as a loan from my event company, Event Gurus.

Within two months, that $8,000 was paid back with the income we generated from the new business.

We still have the event company, and my two partners are still with me. By 2003, we crossed the $1 million turnover mark.

We roughly doubled our revenue every year until we reached $15 million in sales revenue in 2008, six years later.

Today, we have more than 100 staff in seven countries.