Setting Yourself up for Future Success

We virtually convened specialists and leaders to speak on issue that impact the Next Generation. This article features a snapshot of discussion topics from the speakers below.

Dr. Jacky Tang, head, Investment Strategy Group in Asia Pacific, Goldman Sachs
Olivia Xia, executive director, Investment Strategy Group in Asia Pacific, Goldman Sachs
Ed Rose, executive director, Sustainable Solutions Group, Goldman Sachs
Ronna Chao, chief executive officer, Novel Investment Partners Limited
Samuel So, associate, Alternative Capital Markets, Goldman Sachs
Toby Siu, recruiter, Human Capital Management, Goldman Sachs

You have lived through a historic worldwide pandemic and the rest of your life is now ahead of you. While it sounds intense, it’s also an exciting time that underscores the importance of the following takeaways around investing, impact and career.

These takeaways lay the foundation for you to grow your knowledge and discover what drives you, because the next generation of leaders, innovators and thinkers will be distinguished by those who know where they want to go and how they will make an impact.

Investing in a range of asset classes

No matter what path you take in your career, it is vital to make investing part of your life. A first step for young investors is to build knowledge of the markets and the tools available to preserve and grow family wealth. This requires familiarity with asset classes, Jacky Tang explained, and he broke down the characteristics of six basic asset types.

Investment-grade fixed income. The debt of governments and large, stable companies, these securities pay interest and are about the safest investments you can hold.
Non-core fixed income. This is the debt of lower quality companies and offers higher income, one level up in risk.
Public equities. More volatile than debt, stocks offer appreciation potential. Equities are the only asset class to consistently outperform inflation over the longer term, Jacky pointed out.
Hedge funds. The popular image of high-flying hedge funds doesn’t capture this asset class, which encompasses a huge range of strategies that provide diversification.
Private equity. Illiquid investments in private companies, this asset class provides access to less efficient or accessible markets that may present higher return potential.
Real estate. This asset is likely familiar to many in Hong Kong and elsewhere in Asia, Jacky noted, since so much family wealth in the region comes from real estate. It’s also highly illiquid and can add income and diversification to a portfolio.

With the basics established, Jacky had a further message: “You can never predict what asset class will outperform next.”

Enter the quilt

Jacky illustrated this with a colorful chart, an asset class quilt that shows each investment type in a different color and ranks them for any given year from best performer at the top to worst at the bottom. No asset class is always at the top or the bottom. The best asset class one year may well be the worst the next year.

For example, a beige box on the chart represents emerging market equities. It was a top performer in 2017 but a bottom performer in 2018 and 2021.

The blue boxes in the middle of the quilt represent diversified portfolios with a deliberate mix of all asset classes. These are never the best or worst performers. Bringing the point home, Jacky had a chart showing cumulative returns for $100 invested in 2002. If the money were reinvested each year in the asset class that did best the prior year, the investor would have $204 at the end of 2021. If the money were in a portfolio with multiple asset classes the whole time? That initial $100 would have approximately quadrupled to $439.

An obvious question in today’s environment, amid inflation, a slowing economy and rising interest rates, is what an investor should do when markets start acting unpredictably.

Losses hurt more than gains feel good

The reason it's so difficult to not react is a cognitive bias, often discussed by behavioral economists, that makes the hurt of a loss much more than the pleasure of a comparable gain.

Olivia shared a classic experiment on this topic. The subject is offered a coin-toss bet: heads you win $1,000 and tails you get nothing, or skip the bet and receive $500 guaranteed.

More than eight in 10 people take the risk-free $500. But if you change the choices so that heads you lose $1,000, tails you lose nothing, or you skip the bet and lose $500, two thirds of subjects take the coin toss. Loss is so unpleasant that investors try to avoid them more than they want to win large gains.

Portfolio construction has to take into account one’s investment goals, which you should reassess at each life stage. A portfolio might be primarily focused on preserving purchasing power against inflation or it can be tailored to how long the money will be invested or how much is required for lifestyle needs each year.

Investing in meaningful ways

Investing portfolios can be tailored to make a positive impact in the world. Sustainable investing has gone from a niche practice to something many investment managers now consider and a growing number of retail investors demand.

The origins of sustainable investing are in organizations that years ago decided to exclude certain objectionable business activities from their portfolios, Ed Rose explained. An example would be a healthcare company that didn’t want to invest in alcohol or tobacco. Ed referred to this type of strategy as alignment, which is simply aligning investments with specific views. This is one of three main approaches to sustainable investing.

The second is integration, in which sustainable principles are incorporated into the entire investment process. Here, fund managers probe the sustainability practices of every holding considered for a strategy in order to mitigate risk (e.g., physical climate risk, reputation risk) and identify opportunities for the investments to outperform. A flash poll of the Next Gen participants revealed almost three quarters of them believed environmental, social and governance (ESG) considerations are highly or somewhat relevant to their portfolios. ESG investing often considers the following issue areas alongside traditional financial parameters:

Environmental. Climate change, biodiversity, pollution and waste, energy transition
Social. Human rights, diversity and inclusion, worker health and safety, education
Governance. Corporate governance practices, business ethics, board diversity

A third sustainable strategy is called impact investing. This approach also aims for a market-rate return, but the investment itself is designed to generate measurable environmental or social benefits.

“Sustainable investing doesn’t demand one approach for the entire portfolio,” Ed explained. For example, alignment might work well for passive public equity investments, integration for active public equity investments, and impact investing for private market investments.

Investing in your career

The transition from the end of one’s formal education to the start of a career is an exciting time. But it can be nerve-wracking too. Samuel So and Toby Siu offered guidance for this life stage.

As they gave their resume writing tips, job search advice and interview dos and don’ts, they emphasized one point for success: you need to know yourself. Understanding what unique skills you possess and knowing where your passions lie will help you launch your career.

When writing a resume, put yourself in the shoes of the recruiter who will read it — what will that person want to know? Tell them not just about the things you have done but the impacts you made. For example, if you helped organized a club or project at your college, explain how your involvement contributed to its success.

Employers want to know, first and foremost, whether you can do the job. Keep that in mind when writing a resume and preparing for a job interview. The balance to strike with an interviewer is to keep it conversational and natural while also coming in prepared, Samuel said.

Samuel and Toby outlined some straightforward rules for writing your resume to always follow.

One page please. Keep the design simple and the writing concise. Use bullet points to present your experience in reverse chronological order, most recent activities up top.
Don’t use acronyms. Spell things out, and use plain language. Describe your experience using active verbs, and keep each bullet short and to the point.
Spelling and grammar matter. Potential employers will notice errors and typos, hurting your chance to get a foot in the door. Have a friend or family member proofread your resume once you think it’s finished and polished.

An audience member asked whether resumes today need to take account of new artificial intelligence or machine - learning software that employers use.

Perhaps, Toby said, but Goldman Sachs doesn’t use such tools. “I read thousands of resumes,” she said.

Do your research so you know all you can about the industry, the company and the role you are seeking. Most important, be prepared to showcase who you are, describe your skills succinctly, and explain why this job is right for you.

Finding success in the future starts with building a foundation of knowledge today — and that includes knowing yourself and what drives you, and understanding how to invest in time-tested ways that leverage your long-term potential.

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