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| My Family Investing Strategy
I self managed my family portfolio of stocks for nearly a decade. Many of these public listed companies have an unblemished history of dividend paying and many with raising dividend record since they were listed. When market goes up, I use the dividends to buy less shares. When market goes down, I use the dividends to buy more shares. Over time, my share holding increases and the portfolio value increase with the increased share holding and increased share price. Thank god this simple strategy has served me well with and I cannot complain the kind of wealth built up over time. No need frequent monitoring. No need stress. No loss of sleep. Life is short. Enjoy life to the fullest. Crisis? Never mind. The buying and wealth building continues. -- The Averaging Dividend Investor Why I Chose Dividend Investing Anyone who had done technical share trading knows that it is a not a simple task even if you got the best trading software. You need to control your emotion to buy and sell according to the signal given by the stock chart. Furthermore, I believe there are also big player with deep pockets who are also looking at charts. They see what you see on the chart and they can create outbreaks accordingly. I read once somewhere that 90% of traders lose money, 5% break even and the top 5% of the traders win all the money from those who had lost. If you are the top 5% stock traders, congratulation to you. Too bad I also falls into the 90% of poor traders. Proven Strategy As I done my research on the different stock investing and trading strategy, I also found that there are NO STRATEGY that are 100% risk free. Thanks to the internet stock blogger, I also discover that there are many Millionaire Dividend Investor in Singapore who had chosen the dividend investment strategy through a well diversified fundamental sound companies. They have embark on their dividend investment strategy through delay gratification so that they can enjoy their money tree once their trees start growing the money fruits. Expense Paid Dividend investing allows you to do it one small step at at time. First, you got to get seed money and you need to disciple yourself to save. Set small target. I started by choosing the smallest expenses to be paid by dividend. First, I got my Singapore Power bill paid by dividend, then my Singtel bill (paid by Singtel shares), then me and wife daily lunch money are also paid by my dividend stocks. As you progress towards dividend investing, you will find that saving money becomes a habit and you learn to cut down your unnecessary expenses. Nice Bonus There is a nice bonus about investing in dividend paying stocks that send you cash every quarter, half yearly or annually. The ability to generate more cash flow is not widely understood by most people. The more I invest, the more my income is increased. Let's see what this means in a scenario where a single person earns $50,000/year, and saves $25,000/year. Let's assume that this money is invested in a portfolio of dividend paying stocks yielding 4%, that grow dividends at say 4%/year on average. Let's assume that in year two, the person is still paid $50,000/year (assuming it is a bad economy and pay are freeze) and they manage to save $25,000/year. However, the person would also earn $1,000 in dividend income from the dividend seed that was planted in year one. This increases the total annual income by 2%, but increases the amount of savings by 4%. Every little bit counts on the quest towards financial independence.
Savings Preparing your seed money is the first step and is also THE MOST IMPORTANT STEP to begin growing your money tree. Learning to save require discipline and your monthly income is of little importance if you did not systematically save a portion of it. Without saving, you will not have any money for investment to grow your money tree. Therefore, start today and cultivate the habit of savings and cut down those unnecessary expenses. You can begin by learning how to reduce your brokerage fees, make use of credit card that give you cash back and making your purchase online that pay you cash back. Do Not Chase Yields Dividend investing is not about chasing the companies that paid the highest yields. It is more like value investing where you seek out those companies that dividend can be sustained forever. You need to look into what kind of businesses they are in and are they sustainable. For example, SGX operates an integrated securities exchange and derivatives exchange in Singapore and related clearing houses worldwide and no matter how technology changes, you can only buy and sell shares through Singapore Exchange Limited. They are in a monopoly business with no competitor and had been paying dividends since 2001. Stock Are Real Businesses Behind every stock you purchase represent a real business with real assets. Even if a company is not profitable, it still owns assets like buildings and machinery which have a value. Stocks like DBS, Capital Land and Singtel etc. are the employer of many Singaporean and many people will be unemployed and lose their monthly salaried income when these public listed companies are not profitable. So start today by looking at stock as businesses and make your buy call when it makes business sense. Embrace Volatility Dividend investing does not mean you can escape from the stock market volatility. During a bear market, all the prices of stock is going to fall and you going to see nothing but RED in your portfolio. Yes, I have to admit that I feel scared during such time and was wondering whether I am doing the right thing. I kept going and average down my losing portfolio of stocks and continue buying stocks like SGX, ST Eng, Vicom etc. After experiencing a few bull and bear market, you will learn to embrace volatility and instead pay more attention to the value of the companies you are investing. Dividend Shares Trading Once your daily and monthly expenses have been paid by your years of investing in dividend stocks, you can progress to dividend shares trading. For the majority of investors, sharing trading is a loser game and trading dividend stocks might give you an edge against losses. What this means that you only select and trade fundamental strong companies like DBS, ST Eng etc. that will exist for a very long time. With such stocks, you can afford to average down as long as the fundamental of the companies remains strong. So, you keep averaging and collect dividends as you wait for the trend to move up. This dividend trading strategy is simple but powerful. I have seen blogger doing it with great success as fundamentally sound dividend stocks will eventually trend up in the long run. "When you TRADE LIKE YOU DON'T NEED THE MONEY, then you will be successful." Stock Knowledge Building up your stock investment knowledge is the first step so that you can make a buy call for the company of your choice. If you are just starting your investment journey, it make business sense that you should not invest in penny stocks. When I just started, I diversified and stick to blue chips companies like ST Engineering, OCBC, SATS etc. If you do not know how to analyze stocks, you should at least know how to read and digest the information and make a buy call. Today, there an abundance of Free Stock Research Information available on the internet and they can be quite useful in your decision making. Read also; My Dividend Investing Strategy Straits Times Index Stock Price History STI ETF - Exchange Trade Funds How Can I Start Trading Stocks In S'pore |
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