When is the best time to invest

Someone asked this question recently

"when is the best time to invest"

Sure it seems like a simple question.

My reply to that would be "when you have the money"

"Huh?" was the response I get.

Let me elaborate my conversation here in point form:

1)  "when you have the money" means that this money is saved from the monthly salary or when a company gives the dividends as cash, or when one gets his year end bonus etc. Definitely not on credit basis or contra intentions.


2)  anytime is a good time to invest, though at market highs, there might be less opportunities, but that does not mean no opportunities.

Opportunities mean:

a) undervalued stocks - finding stocks which are undervalued or forgotten by most people, and yet has strong dividend history. Getting paid while waiting with some form of capital protection is definitely not a bad idea.

b) growth stocks - finding stocks esp blue chips which are unfairly beaten down such that their yield is higher than their average yield/

c) take note, some undervalued stocks may become growth stock, when that happens, enjoy the ride!


3) invest on a long term horizon, so the time to invest is when one has the money.  Not to use STI as gauge of whether to invest or not to invest, but really taking note of above points 2a and 2b.

Relationship between dividends and the stock market

FACTS:

1) annualised return of djia for past century is around 10%

2) that of straits times index for past many decades is ard 9%.

3) of these annualised returns, approximately half comes from dividends n the other half from price appreciation.

IMPLICATION:

Buying a stock which pays dividend every yr for as long as it exists is key.

a) from above point 3, we know that we get half the deal already if we do so.

b) both points in 3) are RELATED. We know most companies raise dividends over time n this invariably causes price appreciation

THE QUESTION OF WHEN TO BUY/SELL:

We need capital protection which is cornerstone of investments so we do these:

1 a) undervalued stocks - margin of safety concept to determine approximate entry price and exit price when this MOS is lost.

b) growth stock - mostly PB greater than 1. Go only for bluest of blue chips so that its moat and dividend protects it. Determine entry price based on yield n exit price when yield diminishes such that it is getting riskier to hold on or when there is a similar blue chip which has a higher yield. We are assuming it has a lasting strong moat.

2) use dividends to add more or divest elsewhere while holding on to it.

3) keep repeating 1 & 2.

$50K portfolio giving $60-300 EVERY MTH - how to start

For those who are interested in building a similiar type portfolio, here are the points i find useful to look for.
(those expert investors might find this too basic n might want to give it a miss)

I try to keep it short so that readers can quickily get the point.

1) look at dividend history. Forget about companies which skip dividends. We dont want to have a skipped dividend mth during retirement years, do we? Telephone bills still come every mth, like it or not.

2) make a tick of those companies which are able to raise their dividends over the past decade.

3) select undervalued companies if possible ie pb <1. Not to say pb>1 we cannot, we can too, for blue chips with a strong brand n sustainable moat eg st eng sia eng sats (local), mcd colgate chevron (usa)

4) create a spreadsheet or simply write down the months the dividends are paid.

5) for a start, try to space out the dividends, suggest every quarter fill up with some company, then build up n fill up the remaining gaps

6) the whole process might take sometime to do. Enjoy the whole process of planning how you will get paid...for life!


The next post i share whats the advantages of such a portfolio...in my opinion.

Less than 50k portfolio enough to get dividends ranging from $60-$300+ every mth

Check this out.

In approx sums,

$4000 hupsteel $8000 plife $8000 suntec $4000 nam lee $4000 singre $7500 tcil $4000 engro $4000 sats.

The above companies have been giving dividends yearly without fail even during crisis times.

with a total sum of about 45k, one can expect to get dividends EVERY MONTH ranging from $60-300+.

The amt received can be raised or reduced by adjusting the amt vested.

Its a good feeling to be able to collect dividends every mth.

*pls note: this is just an illustration. This might not be suitable for everyone. pls invest according to your own unique situation.

Next post

I will share abt wat to look for in order to build such a portfolio

when does value investing fail (if it does fail)?

1) wrong valuation of company.

2) inadequate mos or paying too high a price

3) failure to discern value from growth company. some companies might have features of both. But it is important to know n understand where the company fits in.

4) lack of patience to wait

5) premature liquidation when the best holding period for some companies is long term to forever.

6) trading mentality takes control of small profit while failing to stick to original plan.

7) buying into inconsistent or non dividend paying companies.

april portfolio progressn

What is market current direction? I don't have a slightest clue nor am i concerned with that. Stock prices goes up or down? Again, this doesnt really bother me as i cannot control prices also. I am having coffee after my morning walk at turf city. sometimes its not a bad idea spending time alone, having to do nothing while most of the other people are busy at work. Going to giant hypermarket to buy some fruits later.

Dividend by mth.
1) hupsteel
2) plife
3) namlee
4) taisin
5) steng singre hwahong suntec teckwah
6) tcil plife
7) engro
8) sats stamland suntec
9) steng singre teckwah plife
10) tcil
11) ngil taisin plife suntec
12) sats


More stamford land and teckwah will be added from my taisin dividend.

Focus will still be on improving cash flow rather than absolute asset price.

Features of current portfolio

1) Improves and increases cash flow, in terms of amount and frequency

2) Removes fear to a greater extent, since most of the above companies pay dividends at those times of the year, or around those times of the year, for the past 10 years. When crisis hits, the assurance of receiving dividends every month is there.

3) Downtime, add more units for same dividend. Uptime, add less. Overall effect is still more units with consequent greater dividends received over time.