Singaporeans love the property market. The fact that it took our government seven anti-speculative measures to dampen Singaporeans' love affair with property since 2007 is evidence that it is very hard to break this strong love. In the meantime, the lack of success is not exactly bad news to the government. They have made 1 billion in tax revenues from the property curbs.
There is substantial anecdotal evidence that more Singaporeans made more money from property than stocks. Just ask and look around. Our parents' generation who dared to invest in property have secured their retirement. It is small wonder the next generation will do the same thing since property investments have worked for decades for so many people.
I have peers who took the plunge and invested a second property 5 years ago. I am sure they are doing quite well. Some have urged me to stop hoarding my money and take a plunge into the property market. Another told me I will never become rich because of my steadfast refusal to take the risk to buy a second property. I probably look stupid to these people. However, I think it is fine to look stupid for good reasons which will be explained here.
In one sentence why I refused to buy an investment property - I cannot control risk with property investments with the same ease as stocks.
Given the very high property prices in Singapore and my own financial resources, I only have enough money to buy 1 property for investment. Only 1. What can be more concentrated than that? The lack of diversification makes it hard to manage risk. With stocks, I can construct a portfolio of 30 stocks with not a single one taking up more than 5% of my net-worth. I can afford to make several mistakes without facing financial ruin. Can the same be said with a concentrated property portfolio consisting of only 1 property? To make matters worse, this single property has to be bought with leverage. How many Singaporeans can buy a property with cash? When an investor uses leverage, his margin of error is greatly reduced. The mortgage debt is usually quite substantial because it can take 20-30 years to repay with today's high property prices. It is quite common to pay 25% cash with the rest using borrowed money to purchase a property. The investor loses 20% when the property drops 5%. Leverage introduces the risk of margin call. Although banks seldom ask borrowers to top up their mortgage loan when property price drops, they are legally allowed to do so. If the borrower misses the interest payment because he loses his job, the bank may foreclose and force-sell his property in a battered-down market at a lousy price. With stocks, there is no need to use leverage. One can build a diversified portfolio with as little as SGD30000 with cash.
Value investors tend to steer clear of bubbles. I do not shun participation in a bubble if the underlying asset is liquid. The end period of a stock bubble is historically characterized by a parabolic rise of stocks in a short time. Being out of the market at this stage means missing out the opportunity to make lots of money in a short time. Thus, I will join in the crowd despite knowing that it is a stock bubble, although only a manageable portion of the net-worth will be inside the market. (Don't try this if you are a newbie in the stock market, particularly if you have yet to suffer gut-wrenching losses) The reason why I dare to join the bubble is that stocks are liquid. The moment danger is sensed, one can get the hell out in a single trading day. This is one of the advantages of being a retail investor with a small fund to manage. It makes risk management much easier. Properties are illiquid with high transaction costs. Unlike an equity investor, there is no way for a property investor to get the hell out even if he desperately wants to because of property's illiquid nature.
If a hired fund manager shows me a portfolio with a highly leveraged, super-concentrated and illiquid portfolio, I will sack him straightaway so that I can sleep better. How to manage risk with a portfolio like that? Middle-class Singaporeans who took on a 20-year mortgage to buy an investment property are doing just that.
Besides the inability to manage risk, there is another good reason to avoid property investments. I hate debt intensely. The only time I overcame this hate was to buy my first residential HDB Singapore flat so that I can marry the love of my life. While this article frowns on property investment, a HDB flat is highly desirable. One motivation foreigners convert to become a Singapore citizen is to have the privilege to buy our HDB flats. Particularly for Singaporeans who have sacrificed for National Service, don't ever miss your privilege to buy a HDB flat. It is almost a sure-win as it is subsidized by the government. Besides, everyone needs a roof over our heads that provides the stability for us to marry and start a family.
Buying an investment property today usually involves taking on a huge debt that requires at least 20 years to repay. This makes a person a financial slave. If the goal of investment is to be financially free, then does it make sense to take on so much debt for an investment that it risk making one a slave for the next 20 years? It is not just money anymore. It is freedom. With a heavy debt, a person has to tolerate bullies at work. It is easy to slip into mental depression if a person has to drag his feet every day to work in an environment that drives him crazy. Although my present workplace is wonderful and I am working with and for pleasant and smarter people at the moment, there is no guarantee that this can continue. The advantage of investing and saving hard is to accumulate enough "fuck-you" money to have the freedom to show the middle finger and quit when faced with unreasonable behavior at work. Buying a second property at this point will take away all the "fuck-you" money that I have painstakingly accumulated over the years.
For high net-worth individuals with enough money to buy up multiple properties with cash, property is an appropriate component in this investment portfolio. It is easier for the rich to manage risk in their property portfolio. For the majority of middle-class Singaporeans like me, I think they should think twice before committing to a highly leveraged, concentrated and illiquid investment that can potentially make a slave out of them for the next 20 years.
Sunday, June 2, 2013
Saturday, April 13, 2013
Characteristics of a good fund manager
I have a theory about hiring smart people to work for you. Once you hire people with the right talent, you can just sit back, relax and wait for good results as long as you drive him with the right incentives. On the other hand, if you drive him with the wrong incentives, he will destroy you despite paying him top dollars. We have seen this phenomenon happened in Wall Street and this almost destroyed the world financial system in 2008. Closer to home, would it serve Singapore better if our smart civil servants were incentivized to raise the inflation-adjusted median income of all Singaporeans instead of raise the GDP? By focusing on absolute growth, the government took the easy way out to grow GDP by importing foreigners without considering the quality of growth. Quality of growth should raise the purchasing power of the masses. Today's unequal world delivered great wealth mainly to the top richest 1% who already have more than they ever need even if they live up to 150 years old at the expense of the rest who have to suffer rising cost of living.
The lesson from Wall Street is that smart people with wrong incentives will destroy. Therefore, when choosing the right fund manager to manage my money, I will first focus on the incentives that drive him, then on his ability.
First and foremost, fund managers should not charge you fees if he loses your money. This means rejecting the standard fee on asset under management(AUM) . This is exactly the kind of incentive that drives intelligent fund managers to harm their clients. Bigger fund size kills investment performance. It is easier to make investment gains of 15% with $200k than $200m. With $200b, it is virtually impossible. How to find investment opportunities that yield 15% if the fund size is a substantial percentage of the economy when the economy itself is mature and slowing down? If the host is not growing, how can the "parasite"? When fund managers are focused on growing their asset size, they are not acting in their clients' interest. Unfortunately, such bad behavior is the norm in the fund management industry. This is not the person's fault but the system's fault (bad incentives). Instead of spending money on core investment activities, they spend money on marketing to grow their asset under management (which leads to poorer performance). For fund start-ups, they may even take excessive risk to have a great year so that they can market the hell out of it next year. Then, once the marketing succeeds and the asset size grows large enough to throw up comfortable cashflow to the fund managers, they start to become risk-averse, be contented with mediocre results as long as they do not underperform the benchmark.
The safest and perhaps most rewarding strategy on a risk-adjusted basis (career risk, not investment risk) for an established fund manager to pursue is to follow the crowd. If they follow the crowd and get it wrong, clients are more forgiving. If they go against the crowd and get it wrong, clients flee and the managers will earn lesser management fees or even get fired. If you want to hire a fund manager, would you want him to focus him to focus on his own career risk or on the actual investment risk which will determine how much money he makes or loses for you? The standard fee on AUM is the culprit for this sort of undesirable anti-client behavior.
Secondly, fund managers should eat their own cooking. In other words, they should invest in their own fund substantially. Preferably, they should invest so much of their net-worth into the fund that if they cause pain to their client by losing money, they should feel the same pain multiplied by 10. This will discourage the kind of short-term risk-taking behavior in Wall Street that led to 2008 financial crisis. Of course, the same euphoria from making money will be felt by them multiplied by 10 and clients will be more than happy to congratulate them. Let's make money together. This way, fund managers will concentrate on the risk and opportunities that really matter in the investment process.
Thirdly, the performance target should be set reasonably high but not unreasonably too high. In other words, fund managers should have a high watermark. The watermark is a performance target that has to be exceeded before the fund manager gets paid a bonus. This ensures clients do not pay for under-performance. The watermark should not be set too high as this could lead to two undesirable outcomes (1) Close down the fund and open a new one to reset the watermark after a series of bad losing years (2) Take excessive risk to hit the watermark. This is not likely to happen if fund managers eat their own cooking.
One Singaporean fund which meets my criteria of a good fund manager is Aggregate Asset Management. They first caught my attention on Business Times as a fund that does not charge any management fee. Zero AUM fees. When I had a brief exchange with Mr Eric Kong on fund managers not being well-regarded because most of them under-perform their benchmark and still charge their customers management fees, he honestly admitted so. This is also one reason why he has decided not to charge any management fees for his hedge fund. I think this is not only ethical but it also makes business sense. Clients of hedge funds are unlikely to be fools, otherwise they could not become rich. They will not remain as suckers for long and will opt for a better and fairer deal for themselves, if there is such an option. Aggregate Asset Management has started the ball rolling.
The founders do not get paid unless they deliver results to their clients. Meanwhile, the administrative cost of running a fund are borne entirely by the founders. They make a strong impression when you compare them to the robbers who committed the biggest bank robbery in banking history on Wall Street in 2008 (robbers being the banksters themselves).
Aggregate Asset Management has a high water mark mechanism (read the FAQ) which demands that the fund managers earn an absolute profit for their clients before they start to earn the first dollar from their clients. This is far superior to the current (and dominant) payment scheme in which fund managers charge their clients management fees on top of the losses they heap on the clients during bad years.
The Founders and their close circle of friends/family have put $3 million into the fund. Although I am not sure what percentage of their net-worth is invested in the fund (the more the better), the fact that their loved ones have entrusted their money with them is reassuring. Once a person is comfortably rich, family relationships become more precious than mere dollars and cents. There is little risk that the fund managers will take unreasonable risks with their clients' money. It is not just money now.
Right incentives alone are not enough. The next ingredient is ability. Mr Kong's personal portfolio return was 17.8% a year between May 2005 and June 2012. This is certainly impressive performance in an 8-year period which covered a business cycle that included the worst global financial crisis for the past 50 years. However, it is not likely that the same performance can be repeated in a much larger-sized portfolio. To the founders' credit, they have humbly and honestly lowered their target to 12% annual return which is still highly desirable. I wish I could match their lowered targets.
(Source: Business Times Nov14 2012 article. Also available from fund website)
Apart from a good performance record, the amount of risks taken to attain the good performance is even more important. High gains achieved as a result of high risks is luck. High gains achieved despite taking on low risks is skill. Would you prefer someone who employs a concentrated portfolio to achieve 17% annual gain or someone who uses a diversified portfolio to achieve the same result? I would prefer the diversified approach because it is lower risk. Aggregate Asset Management employs a diversified strategy.
There is no right or wrong as to which approach(diversified or concentrated) is better. Advocates of the concentrated strategy will say that it is better to focus your funds on your ten best investment ideas than to spread it across 100 ideas. Since it is your best ideas, the probability of getting it wrong is lower. However, as Mr Eric Kong mentions, when a stock occupies a substantial percentage of the portfolio, an investor may get emotionally attached which distorts his judgment. When facts point that he may be wrong, the investor may be too proud to admit it or find it too painful to make the cut. This is a lesser issue in a diversified portfolio which enables the investor to be more objective. I would like to add further that there is such a thing as bad luck. You can be right in your analysis, in your judgment of character, in everything but still lose money when bad luck hits. Good risk management means good damage control when bad luck strikes. An investor who puts all his eggs in one basket and diligently watch the basket very carefully is still not protected from bad luck. Without further elaboration, I have had more than my fair share of bad luck. Hence, I am allergic to a concentrated (and leveraged) portfolio.
I wish Aggregate Asset Management a good start to their investing year in 2013. Unfortunately, I will not be able to share in the prosperity because I am not qualified to be their client.
PS: This is not a paid advertising post. Nobody knows my real identity except my wife. I like to share good financial products/services, particularly from fellow Singaporeans. Other similar posts are (Link) and (Link)
The lesson from Wall Street is that smart people with wrong incentives will destroy. Therefore, when choosing the right fund manager to manage my money, I will first focus on the incentives that drive him, then on his ability.
First and foremost, fund managers should not charge you fees if he loses your money. This means rejecting the standard fee on asset under management(AUM) . This is exactly the kind of incentive that drives intelligent fund managers to harm their clients. Bigger fund size kills investment performance. It is easier to make investment gains of 15% with $200k than $200m. With $200b, it is virtually impossible. How to find investment opportunities that yield 15% if the fund size is a substantial percentage of the economy when the economy itself is mature and slowing down? If the host is not growing, how can the "parasite"? When fund managers are focused on growing their asset size, they are not acting in their clients' interest. Unfortunately, such bad behavior is the norm in the fund management industry. This is not the person's fault but the system's fault (bad incentives). Instead of spending money on core investment activities, they spend money on marketing to grow their asset under management (which leads to poorer performance). For fund start-ups, they may even take excessive risk to have a great year so that they can market the hell out of it next year. Then, once the marketing succeeds and the asset size grows large enough to throw up comfortable cashflow to the fund managers, they start to become risk-averse, be contented with mediocre results as long as they do not underperform the benchmark.
The safest and perhaps most rewarding strategy on a risk-adjusted basis (career risk, not investment risk) for an established fund manager to pursue is to follow the crowd. If they follow the crowd and get it wrong, clients are more forgiving. If they go against the crowd and get it wrong, clients flee and the managers will earn lesser management fees or even get fired. If you want to hire a fund manager, would you want him to focus him to focus on his own career risk or on the actual investment risk which will determine how much money he makes or loses for you? The standard fee on AUM is the culprit for this sort of undesirable anti-client behavior.
Secondly, fund managers should eat their own cooking. In other words, they should invest in their own fund substantially. Preferably, they should invest so much of their net-worth into the fund that if they cause pain to their client by losing money, they should feel the same pain multiplied by 10. This will discourage the kind of short-term risk-taking behavior in Wall Street that led to 2008 financial crisis. Of course, the same euphoria from making money will be felt by them multiplied by 10 and clients will be more than happy to congratulate them. Let's make money together. This way, fund managers will concentrate on the risk and opportunities that really matter in the investment process.
Thirdly, the performance target should be set reasonably high but not unreasonably too high. In other words, fund managers should have a high watermark. The watermark is a performance target that has to be exceeded before the fund manager gets paid a bonus. This ensures clients do not pay for under-performance. The watermark should not be set too high as this could lead to two undesirable outcomes (1) Close down the fund and open a new one to reset the watermark after a series of bad losing years (2) Take excessive risk to hit the watermark. This is not likely to happen if fund managers eat their own cooking.
One Singaporean fund which meets my criteria of a good fund manager is Aggregate Asset Management. They first caught my attention on Business Times as a fund that does not charge any management fee. Zero AUM fees. When I had a brief exchange with Mr Eric Kong on fund managers not being well-regarded because most of them under-perform their benchmark and still charge their customers management fees, he honestly admitted so. This is also one reason why he has decided not to charge any management fees for his hedge fund. I think this is not only ethical but it also makes business sense. Clients of hedge funds are unlikely to be fools, otherwise they could not become rich. They will not remain as suckers for long and will opt for a better and fairer deal for themselves, if there is such an option. Aggregate Asset Management has started the ball rolling.
The founders do not get paid unless they deliver results to their clients. Meanwhile, the administrative cost of running a fund are borne entirely by the founders. They make a strong impression when you compare them to the robbers who committed the biggest bank robbery in banking history on Wall Street in 2008 (robbers being the banksters themselves).
Aggregate Asset Management has a high water mark mechanism (read the FAQ) which demands that the fund managers earn an absolute profit for their clients before they start to earn the first dollar from their clients. This is far superior to the current (and dominant) payment scheme in which fund managers charge their clients management fees on top of the losses they heap on the clients during bad years.
The Founders and their close circle of friends/family have put $3 million into the fund. Although I am not sure what percentage of their net-worth is invested in the fund (the more the better), the fact that their loved ones have entrusted their money with them is reassuring. Once a person is comfortably rich, family relationships become more precious than mere dollars and cents. There is little risk that the fund managers will take unreasonable risks with their clients' money. It is not just money now.
Right incentives alone are not enough. The next ingredient is ability. Mr Kong's personal portfolio return was 17.8% a year between May 2005 and June 2012. This is certainly impressive performance in an 8-year period which covered a business cycle that included the worst global financial crisis for the past 50 years. However, it is not likely that the same performance can be repeated in a much larger-sized portfolio. To the founders' credit, they have humbly and honestly lowered their target to 12% annual return which is still highly desirable. I wish I could match their lowered targets.
(Source: Business Times Nov14 2012 article. Also available from fund website)
Apart from a good performance record, the amount of risks taken to attain the good performance is even more important. High gains achieved as a result of high risks is luck. High gains achieved despite taking on low risks is skill. Would you prefer someone who employs a concentrated portfolio to achieve 17% annual gain or someone who uses a diversified portfolio to achieve the same result? I would prefer the diversified approach because it is lower risk. Aggregate Asset Management employs a diversified strategy.
There is no right or wrong as to which approach(diversified or concentrated) is better. Advocates of the concentrated strategy will say that it is better to focus your funds on your ten best investment ideas than to spread it across 100 ideas. Since it is your best ideas, the probability of getting it wrong is lower. However, as Mr Eric Kong mentions, when a stock occupies a substantial percentage of the portfolio, an investor may get emotionally attached which distorts his judgment. When facts point that he may be wrong, the investor may be too proud to admit it or find it too painful to make the cut. This is a lesser issue in a diversified portfolio which enables the investor to be more objective. I would like to add further that there is such a thing as bad luck. You can be right in your analysis, in your judgment of character, in everything but still lose money when bad luck hits. Good risk management means good damage control when bad luck strikes. An investor who puts all his eggs in one basket and diligently watch the basket very carefully is still not protected from bad luck. Without further elaboration, I have had more than my fair share of bad luck. Hence, I am allergic to a concentrated (and leveraged) portfolio.
I wish Aggregate Asset Management a good start to their investing year in 2013. Unfortunately, I will not be able to share in the prosperity because I am not qualified to be their client.
PS: This is not a paid advertising post. Nobody knows my real identity except my wife. I like to share good financial products/services, particularly from fellow Singaporeans. Other similar posts are (Link) and (Link)
Tuesday, February 12, 2013
Choosing your Valentine from a Value investing standpoint
The most important decision a man can make is arguably his choice of wife. A wrong choice can ruin his happiness for the rest of his life. If he tries to regain his happiness by getting rid of the wrong wife, he risks financial ruin because of the huge cost of divorce. At least women gain financially when they divorce. Therefore, it is very important for men to put very careful thought into the screening criteria for potential wives.
ALL men, including me, start off on a wrong foot when we look for wives. We are immediately turned on by a gorgeous hot babe. Naturally, we get instantly turned off by this other babe (click here).
Like value investors with a contrarian streak, we should not dismiss too quickly what makes us feel uncomfortable. Often, it is the unpopular and neglected that yields value.
Physical beauty is the most over-rated attribute among the qualities that men seek in women. It is so desired by men that we bid up prices of beautiful women in the marriage market to stratospheric heights and yet, is beauty really that important? Have you ever heard of parents advising their sons to get a hot babe who performs well on the bed so that he can receive good sex? To parents who know better, it is always about good character and someone who is respectful to them. Physical looks appeal to our basic animal spirits but in the ultimate scheme of things, they do not matter that much. Besides, all women, however beautiful, must become ugly some day. Aging is inevitable. Postponing the inevitable costs lots of money. Is that good value? Instead of paying up for a depreciating asset, should we men not focus on the more enduring assets like good character, mutual love, great communication, matching interests, good financial habits? It will be ideal if a gorgeous hot babe also possess these enduring assets. However, if such a woman comes along, she most likely will be very expensive to acquire. She will probably be spoilt by rich suitors who treat her with expensive dinners and gifts. The poor and middle-class simply cannot compete. For the richer ones, it will still cost a bomb. Why get yourself embroiled in a bidding war? On the other hand, if we were to place our bet on a value babe who possesses the enduring good assets but looks like a pig, she will not only be cheaper to acquire but the probability of success is also higher. Money spent on wooing girls who reject you yields zero returns. So, place your bets on higher-probability ones where there are no competing bidders.
Alright, I know I know. It is madness to expect men to settle down with a pig-like value babe. Just as investors should choose a style that suits their temperament, men should choose a wife that does not look too abhorrent to their taste. A plain-looking Jane with 2 eyes, 1 nose and 1 mouth should do fine.
If you are a cheapskate on the prowl for value, ugliness presents the opportunity for mis-pricing in the wife market. An ugly woman does not make a bad wife. In fact, it may be a blessing in disguise for her. I have a theory that men who marry beautiful women have a higher chance of straying. They marry for beauty. Unfortunately, the aging wife's beauty fades with time and when that happens (with 100% certainty), they look for a younger and prettier mistress. The ugly wife, on the other hand, is on safer grounds because the husband will hardly notice that the aging wife has gotten uglier because it cannot get any worse. Besides, if the husband really cared about beauty, he would not have married her in the first place. It may not be a bad idea for a man to get used to an ugly wife right from the start since she is going to become ugly one day anyway. This reduces the risk of him womanizing which is financially disastrous even for the rich because of the cost of divorce. Unfortunately, boys will be boys.
Since men are expected to foot the bill on dates, we should think of ways to minimize this cost. The most cost-effective way is to find a wife during your school days. As students, it is fair to expect both parties to go on Dutch since both are not earning an income.
Dating women near or slightly above the marriageable age yields a higher chance of landing a wife. When a woman gets older, she will start to worry about being left on the shelf. Older women are more serious about getting married. Therefore, money spent dating older women is more likely to yield returns than on younger women. The older age is a catalyst that will shorten the time for one's investment to bear fruit. Younger women who are not so keen on marriage will keep the poor man waiting and spending. To minimize your cost, keep your expenses on dates to women who are serious about marriage. The ideal case is to marry the first girl you date and kiss. This is not only cheap but the relationship is also healthy as it is free from past emotional baggage. This advice is not applicable to swinging bachelors who derive pleasure from switching girlfriends and having fun with lots of partners. This is just another freedom of choice for one's lifestyle, although it is a very expensive one.
For men who are thrifty and aim for financial freedom at an early age, it is very important to find a thrifty wife. It is hard to save if one party earns and the other spends. It is hard to fill a leaky bucket. Opposing financial habits in a couple can kill a relationship. The European crisis is an example of such a union at risk of breaking up because of the mismatch between thrifty Germany and spendthrift Greece.
From my personal experience, a good way to evaluate whether a girl is of wife material is to observe how she treats her own family. How she treats her family today is an indication of how she treats you when you become family tomorrow. If she is not a filial daughter, drop her. If she cannot get along with her siblings, find out why. If she loves her family very much and showers them with great care and generosity, she will probably be a good wife to you, a good mother to your children and a good daughter-in-law to your parents. Such a wife, even if she looks like a value babe, should bring happiness to the man who marries her.
ALL men, including me, start off on a wrong foot when we look for wives. We are immediately turned on by a gorgeous hot babe. Naturally, we get instantly turned off by this other babe (click here).
Like value investors with a contrarian streak, we should not dismiss too quickly what makes us feel uncomfortable. Often, it is the unpopular and neglected that yields value.
Physical beauty is the most over-rated attribute among the qualities that men seek in women. It is so desired by men that we bid up prices of beautiful women in the marriage market to stratospheric heights and yet, is beauty really that important? Have you ever heard of parents advising their sons to get a hot babe who performs well on the bed so that he can receive good sex? To parents who know better, it is always about good character and someone who is respectful to them. Physical looks appeal to our basic animal spirits but in the ultimate scheme of things, they do not matter that much. Besides, all women, however beautiful, must become ugly some day. Aging is inevitable. Postponing the inevitable costs lots of money. Is that good value? Instead of paying up for a depreciating asset, should we men not focus on the more enduring assets like good character, mutual love, great communication, matching interests, good financial habits? It will be ideal if a gorgeous hot babe also possess these enduring assets. However, if such a woman comes along, she most likely will be very expensive to acquire. She will probably be spoilt by rich suitors who treat her with expensive dinners and gifts. The poor and middle-class simply cannot compete. For the richer ones, it will still cost a bomb. Why get yourself embroiled in a bidding war? On the other hand, if we were to place our bet on a value babe who possesses the enduring good assets but looks like a pig, she will not only be cheaper to acquire but the probability of success is also higher. Money spent on wooing girls who reject you yields zero returns. So, place your bets on higher-probability ones where there are no competing bidders.
Alright, I know I know. It is madness to expect men to settle down with a pig-like value babe. Just as investors should choose a style that suits their temperament, men should choose a wife that does not look too abhorrent to their taste. A plain-looking Jane with 2 eyes, 1 nose and 1 mouth should do fine.
If you are a cheapskate on the prowl for value, ugliness presents the opportunity for mis-pricing in the wife market. An ugly woman does not make a bad wife. In fact, it may be a blessing in disguise for her. I have a theory that men who marry beautiful women have a higher chance of straying. They marry for beauty. Unfortunately, the aging wife's beauty fades with time and when that happens (with 100% certainty), they look for a younger and prettier mistress. The ugly wife, on the other hand, is on safer grounds because the husband will hardly notice that the aging wife has gotten uglier because it cannot get any worse. Besides, if the husband really cared about beauty, he would not have married her in the first place. It may not be a bad idea for a man to get used to an ugly wife right from the start since she is going to become ugly one day anyway. This reduces the risk of him womanizing which is financially disastrous even for the rich because of the cost of divorce. Unfortunately, boys will be boys.
Since men are expected to foot the bill on dates, we should think of ways to minimize this cost. The most cost-effective way is to find a wife during your school days. As students, it is fair to expect both parties to go on Dutch since both are not earning an income.
Dating women near or slightly above the marriageable age yields a higher chance of landing a wife. When a woman gets older, she will start to worry about being left on the shelf. Older women are more serious about getting married. Therefore, money spent dating older women is more likely to yield returns than on younger women. The older age is a catalyst that will shorten the time for one's investment to bear fruit. Younger women who are not so keen on marriage will keep the poor man waiting and spending. To minimize your cost, keep your expenses on dates to women who are serious about marriage. The ideal case is to marry the first girl you date and kiss. This is not only cheap but the relationship is also healthy as it is free from past emotional baggage. This advice is not applicable to swinging bachelors who derive pleasure from switching girlfriends and having fun with lots of partners. This is just another freedom of choice for one's lifestyle, although it is a very expensive one.
For men who are thrifty and aim for financial freedom at an early age, it is very important to find a thrifty wife. It is hard to save if one party earns and the other spends. It is hard to fill a leaky bucket. Opposing financial habits in a couple can kill a relationship. The European crisis is an example of such a union at risk of breaking up because of the mismatch between thrifty Germany and spendthrift Greece.
From my personal experience, a good way to evaluate whether a girl is of wife material is to observe how she treats her own family. How she treats her family today is an indication of how she treats you when you become family tomorrow. If she is not a filial daughter, drop her. If she cannot get along with her siblings, find out why. If she loves her family very much and showers them with great care and generosity, she will probably be a good wife to you, a good mother to your children and a good daughter-in-law to your parents. Such a wife, even if she looks like a value babe, should bring happiness to the man who marries her.
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