As mentioned in my first article, I am now presenting my first investment portfolio in 2020.
I shall name it Dividend 2030 portfolio. Before I proceed further, a quick disclaimer.
“I am not an investment expert. My sharing is for knowledge and entertainment purpose, it is not a recommendation to buy , hold or sell. Each individual investors will have different goals, values and risk appetites and so please be careful when relying on anyone’s advice. I can personally take it if my portfolio drops in value by 50%. “
Dividend 2030 portfolio
This is a new portfolio that I started in March 2020. I have invested in the Malaysian stock market (also known as Bursa Malaysia). The portfolio will last till 2030, after which I will decide what to do with it.
In this portfolio, my main goal is to hold good quality shares for the main purpose of collecting dividends consistently.
Dividends are payouts from the profits of listed companies, and is a good SOURCE OF PASSIVE INCOME. (Will reserve this topic for another post)
I am not aiming for any capital gain, I am happy not to lose any capital after 10 years of investing.
I am super conservative..
Yes !!! I am a very conservative investor. I don’t like the idea of losing my capital. This is why my favourite investing tool has been fixed deposits, fixed price unit trust funds (e.g Amanah saham) and the EPF.
While these tools have low returns, I was able to sleep peacefully at night.
This peace of mind also enables me to concentrate on my career as a lecturer and consultant (focusing on ACTIVE EARNINGS).
I personally don’t like the idea of monitoring share price daily, and letting it affect my work. For me, investments should be “relatively” passive.
With dividend investing, I do not need to monitor the market daily. Quarterly monitoring is more than enough.
However for the purpose of this blog, I will do a monthly update on my portfolio.
Recently, the central bank’s decision to reduce interest rates has affected my ability to collect my annual 4% fixed deposit interests. The rates have since reduced to below 3% and more interest rate cuts are expected in the next few months.
As such, I am now ready to increase my risk appetite slightly. So I decided to invest a certain percentage of my savings and my active earnings from 2020 in good quality, resilient stocks in Bursa Malaysia.
These monies that I am investing will not be needed in the short term, and so I can accept any temporary decline in the share prices (or my capital).
My Investing strategy.
I am not expecting to grow this portfolio fast. I am a tortoise investor. Slow and steady approach works for me. That’s why I have given myself a 10 year horizon.
Furthermore, I am also contemplating to invest in other instruments such as Unit Trusts and Robo advisors. I will be creating my second and third portfolio based on this.
In 10 years time, I hope to grow my stock portfolio using two strategies:
- Pumping in more capital from my active income over the next 10 years
- Reinvesting all my dividends earned for the next 10 years. This is to utilize the power of compounding returns.
(Just to clarify, I will not be glued to the trading screen every minute, I have other aspects of my career and business to concentrate on, and I have some responsibilities and hobbies that I am pursuing actively.)
In short, I am an investor, not a trader or gambler.
My investing goals and benchmark
If these monies were not invested, I would probably leave it in Fixed deposit, earning a mere 2.5 to 3% returns.
As such, considering the risk I am taking, my benchmark for total annual dividend yield is 5%. To keep things simple, dividend yield is like interest rates on your savings or fixed deposit account.
As mentioned in my earlier posts, I will also share all the details regarding the shares that I buy and sell together with the gains and losses, in a transparent manner.
So please feel free to follow my investing journey for the next 10 years. I am sure there are going to be some happy-bumpy moments.
Analysis of my portfolio
Currently, total portfolio cost stands at RM 91,194. The market value of my portfolio as at 13th May 2020 is RM 95,230. There is an unrealized capital gain of RM 4,036.
Please take this very lightly because prices fluctuate daily and I am personally expecting the portfolio to drop up to 40% over the next 18 to 24 months, due to economic recession.
At the same time I also received an unexpected dividend of RM 585 from my investments in Maybank. Its a nice surprise to have.
Notice the share price of Maybank and Public bank in my portfolio has dropped.
This is exactly why I advice readers not to follow my portfolio and always be ready to see your investment value drop in the short to medium term.
At the same time, please do your homework and perform a lot of research before making investment decisions.
Stock selection methodology
Let me be extremely honest, I have yet to develop a consistent stock selection methodology. I have been researching on stocks for long long time but one of my biggest regret is not doing any notes or journaling. I will start doing it from now onwards, in this blog.
But, let me give you a glimpse of how I selected these stocks. I have a preference for conservative stocks which are cash rich, have minimum debt, and have consistent revenues and profits, with a business model that I understand.
Furthermore, as a dividend investor, I like companies that have a consistent dividend payout policy.
The sudden reduction in share price in March 2020 means that I had to rush through my stock shopping process because yields were attractive and so I bought some of the stocks that I have been eyeing for a long long time.
Although the companies above have a very consistent track record in paying dividends, I am personally expecting some of them to cut their dividends for the next 18 to 24 months due to economic recession. So the yield may not be as high as expected.
I have selected some banks and insurance companies (Public, Maybank and Takaful), Food and beverage (Hup Seng and Cocoland), Energy Sector (YTL Power and Malakoff), Real estate investment trusts (IGB, KIP, Pavillion, Sunway and etc). In addition, I have gone for some well established manufacturing companies such as Panasonic and Hong Leong Industries).
Since the portfolio was started after the Covid-19 crisis, I managed to eliminate hospitality and airline stocks. I would have bought them if the portfolio was started in 2019.
So, I can say there is a bit of luck in the timing in which this portfolio was created.
At the same time, I can also blame my lack of common sense or presence of mind to shop for glove counters earlier, such as Top Glove, Kossan Industries and Hartalega. Valuations are crazy high now.
Nevertheless, I will take it with a pinch of salt because my ultimate aim is DIVIDENDS. (Over the years, I have learned to live with Missed opportunities, If something is not meant for you, it will never happen, again will reserve this for another “emotional” post in the future)
Moving forward, I still have around 10 good, but slightly risky dividend stocks in my shopping list but I am just waiting to see if there is going to be any crash in the stock market, which will enable me to pick up more companies at a discount.
I will create more blog posts regarding my stock buys in the future.
Ideally I don’t think I will be selling any stocks in my portfolio unless there are:
- Changes in fundamentals, example the companies start making consistent losses with no chances to rebound
- Too many dividend cuts annually.
- Better opportunities out there but I have a lack of funds.
If you are worried about investing in the stock market. Kindly wait for me to share my other portfolios to be started soon, utilizing Robo advisors and Unit trust.
I hope to set it up in the next few months before sharing it in this blog.
For those who are interested in Stock Investing, I strongly recommend you have an emergency fund, settle all high interest debts and make sure you invest with money you can afford to lose and don’t need them in the short term.
For those who are interested in additional reading and perspectives on Malaysian stock investing. I strongly recommend two other blogs where real figures are shared. I have learned a lot from them.
Thank you for reading and God bless you.