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I am Malek Ali and This is How I Invest

Published 15 Oct 2020

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By Fi Life Team
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I am Malek Ali and I am…

An entrepreneur. I founded three start-ups, of which one failed spectacularly (classifieds newspaper, KL Classifieds) , one is successful (business radio station, BFM 89.9) and one is still a work in progress (insurtech start-up, Fi Life).

Although all my business activities and networks are in Malaysia, I live in Singapore. I made the decision to move there 21 years ago when Tun Mahathir introduced capital controls and I found myself with a currency I cannot exchange for any other.

I enjoy sports, and pre-Covid, played field football every weekend with a bunch of Malaysians, Singaporeans, VIetnamese and Thais in a public park in Singapore. Football’s been the source of many injuries for me, including a retina detachment, concussions and broken facial bones (I’d like to think I play hard, but I think it’s just my clumsiness).

But perhaps most importantly, I am the doting father of 3 teenagers. They have been beneficiaries of the Singapore education system, though ironically, I have since moved them to international schools because I wanted a more rounded education for them. My eldest is now doing her first university semester online, but she hopes to be in Canada by Christmas.

1. What was your best investment?
My best investment is BFM. I put RM800,000 of my own money and raised another RM4.2 million from my ex-JobStreet colleagues, investors, my co-founders and my brother, and then launched BFM 12 years ago. Until Covid-19, BFM was a gift that keeps on giving as it paid out dividends every year after our sixth year of existence, which were shared between employees, investors and shareholders.

But the financial returns do not compare with the satisfaction of knowing we are making a positive impact on the Malaysian business, economy and society. Building First-world Malaysians is our vision.

2. What was your worst investment?
I lost RM300,000 I did not have when my first venture failed in 1998, and I ended up owing the bank that much. Although the bank disappeared (it got taken over by MayBank), unfortunately, the loan didn’t.

I also lost my RM150,000 deposit on a property in Singapore when I backed out of the purchase when the 2008 global financial crisis struck - see more on this later.

But my biggest regret was not so much an investment, but an own goal. As a pioneer team member of JobStreet.com, I was granted a significant number of shares by the founders. When JobStreet listed on Bursa, I sold most of my shares on the first day of listing. But the stock price doubled in the next two days! It took me 10 years of investing to make up for not holding on to the stock for just 2 more days.

3. What was your first-ever investment (and how did that go)?
My first investment was in the shares of Creative Technology, a Singapore-based sound card maker, in 1999. They dominated sound cards used in computers, and were launching the Nomad, a portable music MP3 player. The share price had promise, but then 18 months later, Apple came out with the iPod and the rest, as they say, is history.

I think I got out of Creative Technology after 3 years with a 20% loss.

4. Your investment no-nos (why not and what happened)
I once dallied in flipping properties. It was very tempting, the Singapore property market was booming, and because banks were willing to lend you 90% of the value of the property, you can leverage your 10% downpayment to get outsized returns (the value property you bought need to only increase by 10% for you to double your down-payment capital). But it is a dangerous game, and if the property market moves against you, you run the risk of being saddled with a mortgage you can’t afford, and a property you can’t rent out.

I was successful at my first attempt at flipping a property, earning about five times my downpayment capital. But as I embarked on my second attempt, the property market had turned sour, and I made the decision to walk away from a property purchase, losing my 5% deposit.

So the big lesson for me was that big-ticket items like property are not for trading, but for long-term investments.

5. What are you investing for?
I was jolted out of financial complacency when my first child was born in 2001. Before that, I was a real risk-taker, as you can tell from my exploits with banks.

My daughter’s birth reminded me of my late father’s harrowing financial experience. He told me that he once walked aimlessly on the streets of Kuala Lumpur at his wits-end, trying to figure out how to find money to buy formula milk to feed me, his 3 year old son. His business had failed and he had run out of money.

So when my daughter was born, I resolved to make sure that she will never run the danger of not having food on the table. I think I became a real adult the day she was born.

Although my father survived his ordeal and had a couple of rewarding ventures afterwards, he experienced business setbacks later in life. I know he was still financially anxious during the last years of his life.

I do not want to experience my father’s anxiety when it’s my turn for the final lap. So I have resolved a long time ago to make sure that my wife and I will have an anxiety-free retirement.

6. Malek’s investment philosophy and approach

Planning for the worst
From starting 3 businesses, I’ve learnt that although we can hope for the best, we need to plan for the worst. I apply that principle to my personal finances too.

The birth of my children made me realise that I needed to plan for the worst case scenario. Being the family’s sole breadwinner, I needed to make sure that they will be fine even if I were to be struck by an accident, major illness, or premature death. I never want them to be put through financial hardship.

So I bought the most cost-effective life insurance policy, which is invariably a term life policy, that will give my family a seven figure sum if I die prematurely. That same policy will also give my family funds to take care of me if I became permanently disabled or suffer a critical illness.

Of course, this was in addition to medical insurance plans for the whole family.

I do not believe in an investment-linked policy as I feel I am likely to get the worst of both worlds: First, I am not likely to get adequate insurance cover, second, my investment returns, after deducting all the middlemen and administrative costs, will be sub-optimal.

I rather get the best of both worlds by separating my insurance and investments: Life insurance with a really high coverage amount that might tempt my wife to arrange to murder me, and a separate investment portfolio that is completely flexible, low cost and earning potentially higher returns.

The Hunt for 10Xers
Once I had that peace of mind, the fun then started (yes, investing can be fun!). I love the challenge of finding publicly listed companies that are potentially 10Xers, meaning, if I buy their shares, they will return me 10 times my investment within a 10 year period.

Some of my 10Xers so far: Amazon, Digi, Visa. Some are on the way there e.g. Facebook, Google, Alibaba, Tencent. Future potential ones are Salesforce, Adobe, Nvidia, Square, Beyond Meat, Ping An and Meituan Dianping. For the same reason, I will buy Ant Financial when it lists next month.

Some of my 10X discoveries are based on reading about macro-trends that affect the world, some are discovered through my own work experience. But sweetest discoveries are a combination of both.

Take for example Amazon. When I read analysts’ reports about it, they were worried about the tiny retail margins of Amazon and lack of profits. But at BFM, a company located on the other side of the world, we were spending about RM3,000 a month on Amazon Web Services, their cloud business. Many other Malaysian companies were doing the same. The US-based analysts did not have any visibility on this, but as a customer, I did. So when Amazon finally disclosed its cloud services revenues years later, the stock shot up.

Sometimes working in certain industries gives you deeper insights than the analysts. Working at Maxis in the early 2000s made me realise how good a competitor Digi was, working at Yahoo made me gawk at Google’s amazing search business model, working at BFM made me realise how Facebook and Google were dominating digital advertising. So I acted on these industry insights by buying into the market’s best competitors.

I also read widely to identify global macro-trends that will help me pick potential 10Xers. For example:
  • Rise of digital advertising (bought Facebook, Google)
  • Rise of software and services on the cloud (bought Amazon, Google, Microsoft, Adobe, Salesforce, Crowdstrike, Fortinet)
  • Rise of direct-to-consumer entertainment channels (bought Disney and Limelight Networks, but gave Netflix a miss because of huge debt levels)
  • Division of the world of technology ecosystem into a US one and a China one (bought Alibaba, Tencent, Meituan Dianping, Ping An, subscribing for Ant Financial)
  • Rise of digital payments (bought most of the financial innovators: Visa, Mastercard, Paypal, Square, Tencent and subscribing for Ant Financial)
  • Increase in demand for meat substitutes (I bought Beyond Meat)
  • Increase in demand for batteries in a world of electric cars, and renewable, but intermittent, solar power (I would love to buy pure play Shenzhen-based Contemporary Amperex Technology, but I can’t as a foreigner. Others like LGChem, Samsung SDI, SK Innovation, Panasonic Corporation are not battery pure plays, so I am a bit reluctant)

I was so focused on long-term macro-trends that I completely missed one obvious short term macro-trend: The increase in demand for personal protective equipment as a result of Covid-19. Those who spotted it, and subsequently invested in Malaysian rubber glove manufacturers, potentially made 10x in a matter of months!

Buy Property to Live In
Like every self-respecting Asian, I do have a fascination for physical property, and have bought an investment property after buying my own home.

I must say though, my fascination with physical property has waned over the years, as managing tenants and maintaining the property takes a lot of effort and time. Nevertheless, I do have an investment property that’s been rented out most of the time (as it’s a 5 minute walk from an MRT) and the rental covers the mortgage payments. Once the mortgage is paid off, that’ll be part of the retirement income for my wife and I.

Other asset classes
My experience with investing in bonds is only through bond funds recommended by my financial adviser. They took a hit during the 2008 financial crisis. I redeemed them and re-invested them in equities. That was the end of my direct bond investment experience.

I do understand the importance of asset allocation, so I make the mental justification that most of my EPF and CPF (Singapore equivalent of EPF) are likely to be invested in bonds. Having said that, I am also looking into investing in bonds indirectly through a robo-asset allocator like Stashaway.

My riskiest asset class are investments in start-ups, my own and others. In addition to investing in my own businesses, BFM 89.9 and Fi Life, I have also invested in Kakitangan.com, a cloud-based payroll service, and Newswav, a news aggregator service. These investments are so risky that my personal financial plan is designed not to depend on them.

Investment Philosophy
In the final analysis, I only invest in things I understand. I understand business, so I invest in equities. I understand property, so I invest in that too. But if things are too complex (e.g. warrants, structured products) or too opaque (bitcoin, investment-linked policies), I stay away. Our savings are too hard-earned to be invested in things we don’t understand.

Follow Malek Ali - LinkedIn

About “This is How I Invest” - As Fi Life’s motto is “Buy Term (Term Life Insurance) & Invest the Rest”, this series features how different personalities “Invest the Rest.”

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