Tuesday, December 25, 2012

Reflections on my dividend investing journey in 2012

So you've made a 12% profit this year. Great. And you've outperformed the S&P and STI index this year. Fantastic. You've lost a little money this year. No worries. Irregardless of whether you've made profits or losses this year, one thing for certain is that you've learned new things from your investing journey which you can reflect and apply to your advantage in the future...and this applies even to seasoned investors who have been investing all their lives.


For those who have known me, I am not a seasoned investors. I only started investing in the stock market back in the middle of the Euro crisis in 2011 and along the journey I've learned a great deal of information and skills which I hope will make me a better investor in the future. Here are some of the lessons which I deemed to be most important in my journey learning thus far:
 
1.) See yourself as an owner, not a trader

Focus on seeing yourself as part of the business owner when you buy a company. Too many people are obsessed with the fast rising of the stock prices of a company when they buy. These people had little or no knowledge about the business nature of the company, not to mention the future of the company. All they care was themselves, periods. Profits - not the company's profits, but their own profits. These people are usually the traders in the market.

2.) Always focus on the long term horizon

The famous Warren Buffet once said: "If you are not willing to own a stock for at least 10 years, don't even think about owning it for 10 minutes". Patience is the hardest part of investing. You have to research and wait long enough to buy a good company at a good price. And once you've bought it, you have to wait long enough to see it out. If you are an investor with a long term horizon, price swings of 3-5% will not make a huge difference over the long run. If you're investing for the next decades from today, your future self will thank you for what you've done today.

3.) Reinvest the dividends

Believe in the magic of compounding. Compounding is the 8th wonder of the world and the good thing about it is that everyone and anyone can access it. This is especially so if you’re still in the wealth accumulation phase of your life, reinvesting dividends is a terrific way to build wealth. I am only in my 2nd year of investing and I've seen reinvesting the dividends and the magic of compounding taking effect on my portfolio.

4.) Be simple and boring

As mentioned in my post previously, investing do not have to be complex and difficult to understand. It doesn't have to be risky as well. There are always companies with a simple business nature and easier to understand than the rest. McDonald, is one very good example of such stocks. Keep it simple, safe and plain boring. You don't need to pick winners from a whole bunch of stocks, you just need to stay away from the losers.

5.) Chant and repeat steps 1 to 4

Ok. You don't have to literally chant them. But you may want to remind and motivate yourself every now and then. It can be a lonely journey, but with constant motivation and perseverance, you will succeed.



4 comments:

  1. Any idea equivalent of MacDonald in SGX. BreadTalk?

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    1. Hi CW

      Maybe QAF??? I am not quite sure about the other business nature of Breadtalk other than its main core but QAF is something which is easy to understand.

      Having said that, we can't compare QAF against McD definitely.

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  2. How do u even reinvest dividends when the actual amount of dividends u receive is too little to buy even 1 lot of shares?

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    Replies
    1. Hi Anonymous

      If the actual dividends you received is too little to buy 1 lot of share (just like when I started), I would wait for it to accumulate before purchasing the share.

      Now, I will just include the dividends received into part of my investment fund which is mostly funded by my salary paycheck. I will then be able to buy into the shares altogether.

      B

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