Me and My money..
His secret to managing money well - having a supportive wife
Ray Barros' wife stood by him through his first 7 years as a trader Despite $1m in losses
By Lorna Tan, Finance Correspondent, Straits Times
'She never once ever said I'm going to leave you or I want you to quit. All I had was encouragement. If not for Christine being there and funding me, I wouldn't be able to do it,'
- MR BARROS, on how his wife Christine stayed with him through thick and thin in all 37 years of their marriage
ST PHOTO: LIM SIN THAI
HEDGE fund experts are supposed to be hotshots at maths but Mr Ray Barros found the numbers game all too hard when he was in school.
In fact, it was the Australian's worst subject when he was at St Joseph's College in Hong Kong, where he lived from age three to 16.
'I was lazy and spoilt. I went through Form 1 to 5 without ever passing maths,' said Mr Barros, the founder of HK-based education firm BarroMetrics and hedge fund Ray Wave Investments.
'I was the only one who got zero in trigonometry, geometry, algebra, maths and physics in one year. The principal kept promoting me till Form 6, which was a public exam.'
The wake-up call came after he flunked Form 6 and was sent to Sydney to continue his studies. He finally buckled down and won a Commonwealth Scholarship and eventually earned a law degree in 1970 although it was the world of investments that eventually became his passion.
After running his own law practice in Sydney for 10 years, Mr Barros, 61, called it quits and tried his hand as a futures and forex trader.
It looked like a disastrous move. He had seven years of free fall where he made little or no income and lost A$750,000 (S$1.01 million) of savings.
Mr Barros had to rely on his family and Hong Kong-born wife Christine Kwan then for monetary support. He also took on jobs like part-time cleaning and teaching, while still trading the markets, to bring in some extra cash.
The turning point came when he attended a series of seminars by Mr Peter Steidlmayer, a director of Chicago Board of Trade over five years from 1980.
'Peter was running courses on market profile. He took me under his wing and mentored me,' said Mr Barros.
'He taught me that trading was a probabilities game. It means you can lose. Peter taught that any time you take a trade, there is a probability of losing so you must know your exit strategy.'
Before he met Mr Steidlmayer, Mr Barros was committing the cardinal investor sin of holding on to losing trading positions. He now has a fixed stop loss.
Married for 37 years, Mr Barros has much praise for wife Christine, 59, who stayed with him through thick and thin.
'She never once ever said I'm going to leave you or I want you to quit. All I had was encouragement. If not for Christine being there and funding me, I wouldn't be able to do it,' he said.
On top of his investment firms, Mr Barros, who splits his time between Singapore and Hong Kong, regularly runs seminars in Singapore and has written two trading books.
Q Any investment tips?
A There's a definite place in a strategy for high-risk instruments but do not put all your eggs in one basket. About 20 per cent to 25 per cent can be allocated to higher yielding high-risk instruments, including hedge funds.
Look for a boutique hedge fund manager with a substantial track record, where the guy who runs the business is the trader himself.
If the hedge fund can generate a net return of 20 per cent to 25 per cent per annum, it is doing extremely well. This takes into account an average loss of about 10 per cent or a maximum loss of about 15 per cent per year.
If you compound $5,000 over 30 years at this return, that's $12 million. For new traders, have at least 12 to 24 months' worth of expenses put aside.
Q What are your money habits?
A I save 15 per cent to 25 per cent of my income. That is only the first step. That money has to work for you. I pay myself quarterly profits from the A$50 million private hedge fund that I'm running and which will mature in March next year. This was set up in 2003 and half of the funds come from me.
I have a private A$1 million account, which I call the opportunity fund, that I use to trade futures and forex. I have managed 30.6 per cent annual returns since the account started in 2003 till end-July. I was out of the stock indexes and Aussie dollar before end-July because I saw the United States sub-prime woes coming.
Whatever I make, Christine takes the whole lot. About 20 per cent to 25 per cent goes into her account, 25 per cent in my spending account, 10 per cent to 15 per cent on business expenses and the rest she administers.
Her money management habits are better than mine.
Q What about financial planning?
A I don't invest in stocks. My savings go into very safe instruments - Australian long-term bonds and fixed deposits. If the Aussie dollar appreciates, I will move to 10-year Australian bonds and if the US dollar is going to appreciate, I move to US 10- or 30-year bonds.
We try not to risk our savings and I rely on my investment ability to hedge the inflation risk.
I have two apartments in Sydney, one of which is being rented out at A$3,200 a month. It was purchased 10 years ago.
Q What about insurance planning?
A I do not purchase endowment plans as I can do better than the returns. I have accident, travel and hospitalisation insurance. I used to have a term-life insurance which I have given up.
Q What is your best investment?
A Attending Peter's classes was my best investment because I made a vast improvement in my trades after that. I started making money in 1983 and the income stream became more consistent from 1987 onwards.
I chanced upon Mr Peter Steidlmayer's classes in a futures magazine and attending his Chicago seminars meant my wife and I had to survive on A$50 a week for the initial nine months. His classes cost US$2,500 (S$3,610) for a two-day class.
I was not trading and I was losing money, so we had to rely on income from her parents or my mum. We lived hand to mouth.
Q What was your worst investment?
A When I was starting out as a trader, Christine gave me A$25,000 and told me not to lose it because that was all she had. I was trading 10-year bonds and I made the wrong call. I lost all of it in a week. The mistake was to hold on to losing positions.
Q What were your growing up years like, moneywise?
A I remember being punished for signing away HK$3,000 (S$557) on food beverages in a country club in one month.
My father disallowed me to sign for anything thereafter and gave me only HK$10 a month. If I did not save 25 per cent of that or HK$2.50, he would deduct that 25 per cent from my allowance the next month. He also matched dollar for dollar my savings. Instead of being a big spender, I learnt to become a saver.
Q What is your retirement plan?
A I have enough savings and retired seven years ago in Hong Kong. Both Christine and I need about A$10,000 for our living expenses a month.
I love to read but I became really bored within six months. There are only so many books I can read. So I taught part-time in a high school and set up a private hedge fund.
I am now starting a new private hedge fund as well as a position dealing desk at Saxon Financials in Singapore.
Q Where do you live?
A I rent a 1,500 sq ft three-bedroom apartment in Hong Kong at HK$30,000 a month, and an office space of 700 sq ft at HK$15,000 just to keep my 3,000 books.
I am in Singapore almost six months a year. I rent an apartment at Leonie Hill at $3,200 a month.
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