My post today is inspired by someone I bumped into in my neighbourhood a couple of days back; prior to that day, I have not seen him for at least a couple of years.
Knowing very well that during this circuit breaker period, we should minimise our conversation with others outside, I said a quick hi, and briefly shared what we have been up to recently. Upon telling him that I am now a retail investor, his question to me was:
‘Is investing risky?’
‘Definitely not, if you know what you are doing, and if you are invested in fundamentally sound companies,’ was my reply.
While I did not further elaborate with him on the above reply (because we both know that we can’t stick around and communicate for longer), I thought this was a good question for me to write about today.
Personally, I feel that investing is just like riding a bike (try riding a two-wheeler bike without first learning how to ride a three-wheeler), or swimming (try jumping into a two-metre deep pool and attempt to swim if you don’t know how to swim in the first place), if you just blindly put your money into a company based on “hearsay”, you’ll likely end up “burning a big hole” in your pocket (for this group of people, they’ll tell you that investing is VERY risky!)
As such, before you put your hard-earned money into any company, you need to make sure you are equipped with the knowledge necessary – there are lots of resources out there where you can learn about how to invest for free – including the huge catalogue of books available in the National Library, numerous videos on YouTube, investment forums like InvestingNote (which is free to join, and there are many experienced investors in there who will be more than happy to share their knowledge with you), and the list goes on.
Besides education, another very important point to note, especially if you are just getting started, is to invest in companies in businesses that you know (and interact with it) – think DBS (Singapore’s biggest bank), Sheng Siong (affordable grocery shopping), shopping malls you frequent (which are managed by some of the Singapore-listed REITs, for instance, Plaza Singapura is a property under CapitaLand Mall Trust, Northpoint is under Frasers Centrepoint Trust, VivoCity is under Mapletree Commercial Trust), hospitals like Mount Elizabeth (which is a property under Parkway Life REIT), etc.
Simply identifying companies is just part of the process – the next thing you need to do (before you invest in the company) is to study the individual company’s performances over the years (I tend to invest in companies that have at least five years worth of historical results to study.) You can learn about the company’s performances through its annual reports, which can be found under the company’s ‘investor relations’ section (just Google the company’s name, along with the words ‘investor relations’, without the inverted commas.) Besides the company’s performances, another thing you want to take note of its its dividend payout to shareholders (my preference is towards companies that declare a dividend payout to shareholders on a quarterly basis, and that their dividend payouts have been increasing steadily over the years.) You can learn about a company’s dividend payouts in its annual reports as well.
One last thing you need – patience. Just like how we have matured over the years, a company also need time to grow its businesses. As it grows (and record improving results over the years), its share price will also go up (allowing you to enjoy capital appreciation on your initial investment), and its dividend payouts will also increase over time (allowing you to receive even more “pocket money” over the years.)
With that, I’ve come to the end of my post today – Especially for those who are looking to get started with investing (and have this question in your mind), I hope you’ll find today’s share useful, and that it addresses the concerns you may have.
If you have additional questions, do feel free to either post your comments in the comment box below (available for those who are viewing this post using desktop), or you can send your questions via email to me here – I’d do my best to answer all the questions and concerns you may have…
Disclaimer: At the time of writing, I hold shares to some of the companies mentioned in the post above, including DBS Group Holdings, CapitaLand Mall Trust, Frasers Centrepoint Trust, and Mapletree Commercial Trust.
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Click here to learn about a quick and easy way to study about a company (and make a more informed investment decision) without the need to browse through its annual reports.
Emile 12 May 2020 at 12:22 pm
Amazing post and quality content every single time! Can’t wait for more post!
Jun Yuan 12 May 2020 at 1:44 pm
Many thanks for the compliments Emile. Really appreciate it! 🙂
Best Regards
Jun Yuan
yipei 12 May 2020 at 1:13 pm
hi Jun yuan, good sharing to alert n educate new investors. risk comes from not knowing what we are doing. from your experience are there times when you know you put in 100% work and patient, but the investment still drop by 20-30% for awhile, before it rebounded?? Looking at warren buffet cut his airlines investments, surely he put in his usual homework, but he never expect this Coronavirus crisis, no one expected this. I find interesting to explore.
Jun Yuan 12 May 2020 at 1:57 pm
Hi Yipei
Many thanks for sharing your opinion. Appreciate it.
To be honest with you, this is the first time I experience a “crisis” (as I’ve only started investing somewhere around mid-2017.) My portfolio fell by about 30% somewhere in March this year (ain’t a good feeling), but I’m happy I held firm and not make any rash decisions to sell off the companies in my long-term investment portfolio.
In my personal opinion, besides having an investment plan and sticking with it, the psychological aspect is also very important – especially when the extreme sell down has nothing to do with a business fundamentals failing, but rather to do with a one-off temporary event. In cases like this, one must be mentally strong to tell him/herself to hold out. Also, especially if companies in one’s portfolio is a fundamentally sound one, they will be one of the first to recover with time.
Just my 2-cents here to share, and wishing you the very best in your investing journey and your website! 🙂
Best Regards
Jun Yuan
Sonny Pierce 13 May 2020 at 10:30 am
Your write-ups are the best so far. One can be knowledgeable but unable to express the knowledge in simple language or words to others (Sad case of almost 90% of my university lecturers in Singapore!) Keep it up! As one has commented before, I am one of those who wait for your next blog. It is worth my time to read it. Thank you for taking the time and the effort to educate us.
Jun Yuan 13 May 2020 at 10:54 am
Hi Sonny
Wow! Many thanks for your compliments. I really appreciate it from the bottom of my heart. 🙂
If there are any areas you’d like me to write about, do feel free to let me know. I am open to new ideas and suggestions to further improve the site.
Best Regards
Jun Yuan
yipei 13 May 2020 at 4:26 pm
Very honest and sincere reply 👍🏻
Yes psychology is indeed everything to me, towards consistent success, because stock market is about people, emotion, fear and greed, and money.
20 years in investing and I spent 6 years studying why sometimes the same strategy doesn’t work, its frustrating that after spending great amount of time and effort, and still seems to make a wrong move at the wrong time, and I discovered a tool to guide me on the ” unknown” factor or energy (example coronavirus). I always feel hardworking investor should not get pull down by this factor, so I am trying my best to quietly promote it. Can have a regular update on my telegram channel, and have an open mind to discover and explore.
https://t.me/investmentiming/22
Continue your hard work
happy investing and stay healthy
yipei
Jun Yuan 13 May 2020 at 5:06 pm
Many thanks for your well wishes, Yipei. Appreciate it lots! 🙂
Best Regards
Jun Yuan
christina wong 14 May 2020 at 1:11 pm
hi Jun Yuan
thank you for taking the time to write and educate us in your blog. i have truly learned a lot.. and love that you go through all the annual reports and give us the concise report.. (i often just trash the annual reports)..
i’ve been investing in shares but had been burnt many times and loss lots of money too in the past…
but now I’ve just held onto some blue chips and just enjoy the nominal dividends yearly…
however, i do find that having so much money locked down in the stock & shares and with only nominal returns seems to be quite a daunting decision and situation…
i am and, i’m sure lots of people out there, are trying to grow their money as much as possible…
i’m not sure if asking this question would make sense… what’s the best form of investment?
or also.. what are your thoughts on short-term stock investments?
hope you understand my question and where i’m coming from.
nonetheless, i truly enjoy reading your tips and blog and only most recently been introduced to it… better late than never.
stay safe, healthy and happy!!
cheers
Christina
Jun Yuan 14 May 2020 at 4:56 pm
Hi Christina
Many thanks for your message, and also for your compliments about the posts within. I really appreciate it, and am really happy to hear that you’ve benefitted from it.
I’m not sure what is your selection criteria when it comes to choosing companies to invest for the long-term, but for me, I will look at the company’s financial performance for at least over a 5-year period and they must be recording improvements over the years. In terms of debt, the company must have minimal to no debt (I prefer net cash companies.) Also, as far as dividend payouts are concerned, my preference is towards those that pay out on a quarterly (if not on a half-yearly) basis, and that its dividend payouts have to be an improving one over the years. As far as the share price of a fundamentally sound company is concerned, as long as the fundamentals of the company is good, its share price will follow (and move upwards over time.)
As far as short-term trading is concerned, one advice – NEVER trade against the trend. Also, you need to have a proper plan drawn up before you enter each and every trade – including your entry price, your profit target price, as well as your stop-loss target – and follow this plan of yours accordingly. I’m not sure about your proficiency in technical analysis but as far as short-term trading is concerned, having a good knowledge of technical analysis is a must.
Hope the above answers your question. If there’s anything you’d like to clarify or ask, do feel free to let me know.
Wishing you the very best in your investing journey! 🙂
Best Regards
Jun Yuan
christina wong 15 May 2020 at 2:01 pm
Hi Jun Yuan
Thank you for your reply and advice. Definitely worth considering.
I know you mentioned that it’s better to invest in companies that payout dividends twice, if not quarterly basis per year.
As an example and analysis, I was comparing between Capitaland & CapitaMall Trust.
Capitaland pays out dividend only once yearly and based on last year’s rate of SGD0.12 per security. While CapitaMall Trust, paid out 4 times last year between the rate of SGD0.015-0.031. I’m just wondering if the total dividend for the year from CapitaMall Trust, would it be more than Capitaland?
As for short-term trading, no i have no technical analysis knowledge. Hence, I do try to tread carefully on that. Can you elaborate further when you say NEVER trade against the trend to help me understand better please?
thank you so much. pardon me if i’m too ignorant.
cheers
Christina
Jun Yuan 15 May 2020 at 2:21 pm
Hi Christina
As far as dividend payouts are concerned, as long-term investors, we don’t just look at the dollar value of the dividends we will be getting – but rather, we look in terms of percentage – let’s say you buy company A at $1.00, and their dividend payout for the year is $0.10, as such, the dividend yield is 10% ($0.10 dividend divided by your buy price of $100). Compared this to company B, where it costs $20, and the dividend payout is $1.00 a year – the yield is only 5%. Comparing both companies A and B, of course company A will be a better buy in terms of dividend payout because its yield is higher.
But having said that, you also need to look at the company’s dividend payout over the years – whether is it increasing (my preference), or whether it is stagnant (meaning paying the same amount of dividend over the past couple of years.)
Moving on to short-term trading, to answer in layman terms what “not to trade against the trend is”, let’s say the share price have been moving lower and lower over the years, you wouldn’t want to enter trade in the company in hope that the share price will reverse and spike up in the short term (as most of the time it does not happen, especially if the drop in share price is because of the company’s fundamentals have weakened over the years.)
Hope the above clarifies. 🙂
Best Regards
Jun Yuan
christina wong 17 May 2020 at 3:12 pm
Thanks Jun Yuan
You’ve been very helpful. Really appreciate your advice and knowledge.
cheers
Christina
Jun Yuan 18 May 2020 at 9:04 am
Hi Christina
You’re most welcome. Am happy to be able to help. You have a great week ahead! 🙂
Best Regards
Jun Yuan