The 12 Year Old Fund Manager



“I see no hope for the future of our people if they are dependent on frivolous youth of today, for certainly all youth are reckless beyond words… When I was young, we were taught to be discreet and respectful of elders, but the present youth are exceedingly disrespectful and impatient of restraint”.

Hesiod, 8th century BC

Allot is and has been said about the youth since the very beginnings, and today with our millennials, the story goes in the same one-dimensional manner. On that note I refer to the renowned speaker Simon Sinek as he has been known to describe our youth as superficial, unsatisfied, lazy, impatient, entitled and more. Although I do personally admire his motivational work, generally agree with principals and appreciate his intent, I do disagree specifically with this generalization of his claims on millennials specifically.

In our modern world of semi-absent parenting, technology, multimedia and environmental hazards I actually find as in generations before, as is tradition, that our millennials do challenge the world, question it and yes expect more from it. As youth, that is their right and role! Sure, in taking risks, one can fail, be wrong, cause disruption – but then again, risks if understood, managed and explored through trial and error, can occasionally result in one being right and succeed in ways that never seemed possible! – The process itself, if you allow it, can trigger a rupture in innovation.

So, youth as a ‘species’ is here to dare, to be bold, to question everything and everyone, discover new boundaries of what is expected. On one side, as a social being they have a need to be accepted, but then again have quite an urge to be different, unique and make their own claim on the next ‘impossible’.

Now, I will discontinue my plaidoirie on youth and return to why, dear reader you are here; namely to inquire on the assertion of the existence of something seemingly impossible, A Twelve Year Old Fund Manager.

Some weekends ago, I was busy boding with the next financial comics, preparing my work for future publications when I caught a note from someone, from his profile, a kid, a teenager inquiring about my  comics on one of the social media channels I occasionally post on. I do usually try to respond if I can. He complemented me on my financial illustrations and I probably would have just given a quick and by all means grateful thank you, since I was quite busy. For some reason two things caught my interest: – firstly, I don’t usually get feedback from barely teenage kids, since my comics cover banking and the financial industry. My audience are usually grown-ups, financial professionals or those interested in economic aspects in general – Secondly, and the one that really stood out was the intricate and subtle way with which he placed the question. He basically asked if I am also an investor. Nothing necessarily unusual, but to put context into the question, he wrote in the local Swiss-German dialect, so his placing and order of the wording resulted in giving the question a different edge. His question was not asking if I was an investor in addition to being a cartoonist. No, the question was essentially asking if I were also an investor like himself. So, I responded that yes, as a banker I do. I asked if he were interested in finance. I could feel this was the question he had set me up to ask and on that queue he just shot out his prerogative: “I bought my first stock when I was seven. Since my eighth year I have invested successfully. Since about a year I manage a non-public fund. I am now twelve years old.” Well, there you have it, I guess now he had my attention!

I was quite baffled, since I had never heard of a such a young ‘fund manager’, at least outside the realms of Hollywood. I thought he might be pulling my leg, so I resumed in testing his knowledge and background on the basics and fundamentals of finance and investing. He quickly rebuffed any doubts as to his knowledge and insights. We spent some time going over his background; his father being the CIO of a major Swiss financial group. He described how he was currently beating the market on a year to date return of S&P500 of 12.9%, his returns being over 25%. He casually mentioned  his taking part in a renowned world trading championship with almost three million participants, covering all fields of the investment community. The investment period was one year. I don’t know how most of the investment professionals would feather in such a competition; I guess if you were any good you might end up in the top 10%, so basically, in the top 300’000. If you made it to the top 1%, then within the top 30’000 participants. Any investor could count himself proud with that result. Well, this young gentleman from central Switzerland claimed 1st place and won the entire championship, with returns of several thousand percent returns to his name. As a note, he insisted I mention he was no longer in 1st place anymore, as he is not that active in the investing game anymore. So his current placing is a mere 10th place.

From this point onward, let’s refer to this young gentleman as Richi. We agreed I would not disclose his identity. As he is just barely a teenager and as a typical Swiss, not necessarily one to jump into the tumbled spotlight on the basis of his own trumpet – preferring and residing to the shade and calm irony of the understatement. We agreed that he might and probably will disclose his true identity when he is older.

Update: It has been almost a year since the initial publication and in the meantime he asked me to disclose his true name: Richard Schäli.

The only dream he has since a child is to get a telephone interviewed by CNBC. So, I congratulated him on his amazing achievement and promised to dedicate a comic to him, from the Bankey. He thanked me and was really happy, and that was that – almost! The more I thought about it, the more intrigued I became as to his formidable background and accomplishments. How did this all begin, how did he get there, the details of his upbringing, his surroundings and role models, guidance? He continued to tell me more insights into his financial journey and his passion for international stock markets. At large, we agreed that I would interview him. I compiled a set of topics and key areas so he could prepare. The next day, Sunday afternoon, we had our first telephone interview. After several correspondences both written and via telephone I headed to central Switzerland to meet the young man and his family in person. Richard Schäli had an open minded and curious air to himself. At first glance a perfectly normal kid, well-spoken, confident, not necessarily overly extroverted as to the in your face bluntness or the overindulged type, but more that of the calm, straight and keen eyed individual, settled yet witty and direct. He chose his words carefully and it was endearing to observe how he and his mother would communicate non-verbally on specific cues. Being a comic person, I thought, if Batman’s powers were in financial investing, then this is what the twelve year old Batman would be like.

The Interview

Who are you Richard Schäli? 

I am a twelve year old investor and I have been investing for the last five years!

What do you want to study and where (silly question)?

I want to study finance in HSG (University of St. Gallen), Masters. Then I want to go to Harvard, maybe do a PHD.

So the real deal, no short cuts! So I guess you have good grades? Any hobbies, football or gaming maybe? How many languages do you speak? 

Yes, practically perfect average score. Almost a straight 6 (the Swiss system). Favorite topic are maths and German. I do fencing, really enjoy that. I play some piano and flute, but don’t really enjoy that. Football, not really that interested. Not into gaming either. I like comedies mostly. I really liked The Dictator. I speak German, Swiss-German, some French and some Serbian words and sentences from my mother.

You mentioned you bought your first stock at seven years of age, tell me about it. 

I bought Zurich Insurance Group. I made 20% gain. To be honest, I would say this was a lucky strike. I more or less randomly picked a stock from a watch list my dad and I were following. I remember the only thought being that the stock had a high dividend pay-out ratio.

How did it all begin, did your father help you?

Yes, as Chief Investment Officer of a well know Swiss financial group, he introduced me from an early age to the markets. He explained the fundamentals of value investing. I learnt how to evaluate a company using a broad set of tools and measures. I know exactly what to look for and know how to judge each measure in relation the other, be it Price/Equity or Price/Book, Growth rates, Debt ratios etc. From then on, when I was eight I did a lot of research myself and read lots of books and autobiographies.

Really, at eight! I guess your daily literature was not Harry Potter then? 

Not really. The only thing I read sometimes was a series called Raetsel by Enid Blyton. Mostly I guess I did read more sophisticated books than my classmates.

What areas did you research? 

I studied day trading, technical analysis, chart analysis and fundamentals. I also had mentors to teach and guide me in the various areas.

Most classical finance professionals don’t believe in chart analysis!

Yes, I am aware of that and for long term investing that is true. However, for short term trading there is actually value in it. Nevertheless, most are skeptical because they have never done it or don’t understand it. Technical analysis is a skill on it’s own.

Did you get the mentors through your father?

Not really. As I did my research I got to know the big names in investing. I also did a presentation of my passion at school. I then wrote to a few personalities that I admired and had been following. They responded to me and since then we talk on a regular basis. – For chart analysis my mentor is Michael Sincere, the author of several books on stocks, markets and option trading. – Another mentor is Toni Turner, author and educator on trading and investing. She gives me insights on chart analysis and technical methodologies. – In addition, one of the most successful investors (Forbes listed) mentors me in fundamental analysis along with my father. He is my greatest role model, even more than Warren Buffet. We talk and write on a regular basis. We meet when he is in Switzerland, usually once a year.

Anybody else you admire in business?

Yes, I really like Jack Ma!

Very impressive. I see your eat, sleep and breath financial markets. What does your mum think of all this? Do your siblings invest too?

She is happy that I have something that I enjoy doing. She is a medical doctor so this is not her field although she did do some investing some years ago. She supports me here, absolutely. Yes, my siblings invest too, but I am 100 times more active! (unmistakably, an acute sense of pride there!)

Back to the beginning, did your father give you an investment amount to begin with at seven or eight?

No, he was quite particular about this. I invested from the beginning my own pocket money. He insisted in me not having any kind of leverage! I get a state allowance (specific to some Cantons) of 200 SFr a month and additional 5 SFr pocket money a week. I always invested my money. My dad said it was important to start at the very bottom, start at zero! That I learn from my own mistakes and losses. In addition, I would earn some money doing odd jobs here and there, earning 10 to 20 SFr, which I invested as well.

Like what kind of jobs?

Like walking dogs. So, I always reinvest my returns. This way I can maximize the compounding effect.

Tell me more about the investment competition.

This is a very good way to learn about investing. It really forces you stay focused on the market every day to detect any interesting opportunities.

Did you use options strategies?

No, just a pure equity strategy. Usually small-cap stocks. However, as a cautionary note: the competition is still a game. You are not really investing, only simulating. So, whatever you do, does not influence the market. In reality, investing is more difficult, because there is a dynamic process, since your trading actions impact the prices and behaviors of others. In the game, your actions are completely detached, you are just an observer or consumer of the market, not a participant.

How about risk management, diversification, do you understand volatility, beta or VaR?

I am not trying to build an index, nor am I focused on diversifying. This is not my goal. I have about 20 stocks on my watch list that I follow, for which I have notification signals when they reach a target price. I have read about the measures you mention, but they are not the main drivers in my decision making or stock selection. I think I will learn more about those measures when I start studying later on. My mentor say, no risk – no fun!

I understand from your point of view, you are twelve years old and have a life time of investment horizon ahead. Risk is not your biggest worry.

That is true, I have not lived through a real financial crisis yet. But I do follow the indicators. For example, if you look at the three month yield curve, it’s higher than the 5 and 10 year yield curve. This could be an indication we are heading for a recession. That alone does not say everything, it is just one of many indicators, but I do follow them.

You don’t invest in the Swiss market?

The Swiss market is good when there is a market crash or a crisis. It has many strong and robust companies. I follow several markets worldwide, but my main focus for now is the US. I frequently watch CNBC  and Bloomberg TV to get my daily insights of new companies and financial developments.

You mentioned you are a fund manager!

Yes, this is a private fund, non-public and the investors are primarily family members. They consist of aunts, grand uncle, cousins and investments from my close family. My father also helps me here especially with the administrative part. But I have full reign over the investments, from methodology, research to implementation.

Do you allow non-family investors?

No, for now I just invest for close family.

Who oversees the fund, is it audited?

The audit oversight is my dad. We send out a weekly newsletter to all the investors. It basically gives a summary of the winners and losers, biggest positions and some comments on expectations.

Does the fund have clear a investment strategy?

Generally the fund outlook is long term. The portfolio is an equity strategy investing mostly in growth companies. The benchmark to beat is S&P500. Accumulated returns since the official inception (per February 2019) is about 20%, with S&P500 less than 5%. As a principal to my investor relations I have stipulated to strive to achieve no losses. Since there is a certain amount of risk I am taking, this can mean that I am prepared to liquidate the portfolio, taking short term losses into account in the case of a crisis.

In which markets and segments do you invest?

Primarily in the US market. So most of my investments are dollar based, little currency risk so far. This could change though. Generally I can say that Asia is becoming more interesting.

Do you have a specific approach?

I use several tools and methods, but I can say for sure this: Firstly, I look for a firm with a big vision! Secondly, fundamental analysis where I look at price/earnings, earnings/share etc. Thirdly, I invest primarily in technology companies usually less than mid-cap range.

Are you interested in firms like Tesla? 

I do admire Tesla and the incredible disruptions Elon Musk has made. However, founding a firm and running a firm are two different things. I don’t like the fact that a Tweet can cause so much upset on the market. Fact is: Elon Musk is an excellent founder for example Paypal, Tesla, Space X, but he is not a good leader of a company. At the moment it is still at an early stage, but I observe it.

Do you follow Warren Buffet’s investment philosophies? 

Yes and no. He never really covered technology, but I think he came from a different era, with Coca Cola and Gillette. I am from a technology era and in terms of risk I can take on more, I am only twelve.

I guess you have the standard 2/20 fee structure (2% management fee and 20% performance fee%)?

No, I get exactly 1%!  For me the real value is the possibility to invest and learn something in the real investment world and markets. When I won the investment competition, that was different, the money invested was just a fictitious 25’000 start capital. With this fund I am investing real money. Every decision I make will be felt.

In addition to the fund, I guess you manage your own money too?

Yes, but my personal portfolio I manage much more aggressively.

What is your overall return on that portfolio?

I bought my first stock 5 years ago and have added funding to it over the years. However, neutralizing any external cash inflows my performance is about 200%.

Do you share your passion with friends?

Yes, over the years I have found friends all over the world. Some also took part in the trading competition and we share ideas and tips regularly. I also coach them too.

Do they pay for your tutorials?

No, they are friends! We just enjoy investing.

So Richard Schäli, as the Roger Federer of investing, do have you got any tips for the reader before we close?

Yes sure, – I would say the first one is, never fall in love with a stock or investment!

Why not? 

Because you will ignore the negative side of the news and your good judgement will be temporally distorted. It’s better to fall in love with the investment process itself! – The second one is, for growth, don’t invest in big companies! They cannot grow 500% a year! – The third one is, you never learn as much as from your own mistakes. It is important to have a positive attitude towards them.

Can you be specific here?

Well, I keep a trading dairy.

So you list all your trading activities there?

No, I only make notes of the mistakes I made.

That’s interesting. Some people would take every opportunity to amplify and glorify ones successes, but you only journal your failures! 

Well yes, it’s a diary of my mistakes. This way I try to make sure I don’t do them again. I review my dairy about once a month.

One last question on when you approached me, what do you think of the Bankey?

I think it is a really great idea and very unique! Not easy to cover this industry. You do it very well and I find your comics very amusing.

Which is your favorite? 

I really liked one on Fintech Africa, also didn’t know about the strong fintech developments there. Also the one on Bitcoin with the wave on the horizon I like.

Thank you for sharing your financial investment journey and your insights with us Richard!