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Sun Tzu said, "If you know yourself and your enemy, you fight hundred battles with hundred victories." Knowing yourself is important when it comes to investment.
I preferred to be a investor due to the following reason:
1) I am not a TA expert for short term (I try to learn for one year, but the chances of success is still 50%). I don't think I can predict stock price movement better than a kid who is just merely guessing.
2) I want to have a stress free mentality when it comes to buying stock. I prefer to buy and hold for good stocks for dividend rather than trading speculative stocks for short term gain. Receiving constant dividend is a source of passive income. Trading for short term gain is a type of gambling. The more stocks I buy, the more dividends I get, that's why my passive income is increasing. With this in mind, I can sleep well every night.
3) I rather spend more time to do other thing that can increase my active or passive income, than mindlessly looking at the prices of the stock jumping during trading hours. Reminder time is money. There is no need to keep track of other thing like the Dow Jones future.
4) Trading need to pay a lot of commission for buying and selling. If one trade is $30, ten trade per month already $300. That money can be better used for long term investment.
5) I have constantly saving part of my income for investment. Together with my passive income, I can buy any time when there is any correction from the market.
Lastly Sun Tzu said, "The best outcome for war is to win without fighting". I am currently following my winning plan with ease and stress free.
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12 comments:
Hi,
I read your blog with pleasure and i have the same mindset as you to buy dividend stocks. However, people are saying that the buying and hold method is not really practical nowadays, which i agree to a certain extent.
How about you? Also, in terms of these dividends stocks, care to share more about your portfolio or which are the better dividend stocks to grab when the market dips?
Regards,
Gabriel
Hi Gabriel,
Thank for reading my blog.
Different people got different strategy that work for them. One important thing is to know yourself first and see which strategy is best for you.
The interesting thing about this game is that no one that can predict the future. Winning or losing is depend entirely on the strategy you adopted. Being emotional or stress up has a high chance of losing this game. If you feel emotional and stress up, that more likely your strategy does not work well.
The winning odd for my strategy is near 100%, but slow. I always do thing when I am sure to achieve something out of it, otherwise is like gambling your time with unknown result.
I want to be wealthy and not rich. My aim is to slowly build up my passive income, rather than captial gain. Keep buying strategy will increase my passive income, trading will not. With my passive income and my saving, I can keep buying. With more stock on hand, my passive income will continue to increase, and I can keep buying more. This is shown on my cash flow diagram.
When market goes down, I will buy more, when the market go up, the dividends given are more likely to increase. In this sense, I am not emotionally affected by the prices of the stocks and I only look at stock when I am ready to buy. I am happy when market go up, go down or stay still. I have completely no stress at all.
For choices of stock, look for those bluechip company that always give regular dividends specially during the recession or bear markets and chances they will become bankrupt is almost 0%. If you have the capital, DBS is a good choice, cos so far it has been giving dividend every quarter. This year, it has been giving $140 per quarter, which is $560 per year(if $140 is also given in the last quarter.) This works out to be $46 per month. For cheaper stock, Singnet is also a good choice as the price does not varies much. STI ETF is a good choice too, you may be amazed that they give out a lot of dividends too.
For example, you buy one lot of DBS per year, ten year time your passive income will reach $460 per month if they give $140 per quarter. If they happen to give $300 per quarter in the next bull market, your passive income will reach $1000 per month!!!
Lastly, only use the extra money that you have to invest. Do not borrow any money for investment.
Regards,
Freedom Achiever
Hi Gabriel,
And one more thing, you can read my Jack and Jill story @
http://lifelongfreedom.blogspot.com/2009/10/jack-and-jill-story.html
It may give you a better idea why I choose to be a investor.
Regards
Freedom Achiever
Hi,
Thank you for your good advice. I just started trading in stocks about 4 months ago and i got to admit that i was more of a punter than an investor due to my greenhorn experience.
I would check the prices frequently, worried if it actually went up or down. However, something just struck me recently and i feel like this would not work in the long term. No doubt i had my gains over the past few months, perhaps lucky due to the fact that the market was recovering, but it was not sustainable.
I have a clearer picture of the market now and how one should actually build up his portfolio. I have got a few lots of sti etf already and it is certainly one of the good choices available.
However, i have a couple of questions. You mentioned about passive income. No doubt if i am able to receive dividends i would not really have to bother about capital gains (too much). However, if the capital gains decreases too much, wouldn't you be worst off than from the start?(e.g starhub giving good dividends but stock is now trading at much less due to the cable tv)
Or am i correct to say that because we choose to invest in the company, it is usually good in its fundamentals and in the long run, the chances of the business failing is almost zero?
Also, i am actually still at a young age (turned 22 recently), are there any other instruments that you feel is necessary to take up/ do at my age? I have my life insurance policies in place already.
Thank you so much.
Regards,
Gabriel
Hi Gabriel,
I will state one of the quotes from Warren Buffett to answer your question: It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Yes, always invest in those companies that are good in its fundamentals and the best time to buy at its fair price is during the recession.
If it is a wonderful company and the price has dropped a lot, I will continue to buy more instead of cutting loss. Sooner or later, the price will eventually go up. (This will require you to have a lot of discipine and strong mind).
Lastly, I am not very sure whether starhub has a good fundamental. To me, it seems to be a fair company only. Giving a lot of dividends does not mean that it is a wonderful company. If you compare to singtel, which one do you think is better?
Regards,
Freedom Achiever
Hi FA,
I have personally read quite a number of books about warren buffett so i can understand where you are coming from.
i agree that to be an investor, it takes one to have a strong mind and it is something which i will have to learn.
Thank you for your guidance and hope to see more posts from you.
Cheers
Gabriel
Hi Gabriel,
You are welcome :)
Regards,
Freedom Achiever
Hi,
I do agree with you on investing rather than trading. The world second richest man is an investor and not a trader.
I have only just starting my road to finanical freedom. I will start my investing after going to a program.
Let's work hard together ya.
Tiger
Hi,
Try to set a working plan for yourself and follow it. :)
Regards
http://createwealth8888.blogspot.com/2009/01/active-and-passive-investing.html
http://createwealth8888.blogspot.com/2009/09/active-investing-passive-investing-and.html
Hi, thanks for sharing at the CNA forum and in this blog.
I suggest a way to have a "strong" mind is to think in terms of wealth instead of cash.
In trading, yes, one may have lots of profits, i.e. cash, made. However, passive income remains at 0.
In investing, because one keeps buying and seldom or never sell, capital profits are mainly on paper while dividends/yields seems little compared to the capital profits. However passive income grows.
At the moment, trading and investing are two quite different things to me. Trading is an act to earn cash, just like working. Investint is an act to handle the cash on hand, while other ways to handle cash are spending it (expenses), put it under pillow (??), put in the bank (saving), buy gold/silver (hedging), buying properties, foreign currencies, and etc.
Hi Back2Nature,
You have fully understood my post. My target is to get wealthier when time passes. And investing in stocks is one way to get wealthier if you buy good stocks at a fair price.
Regards,
Freedom Achiever
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