Read? How to become rich in stocks???
Borrow the idea from La Papillion
** "BIAS" is a special feature in my blog where I get to say whatever I want with scant regards for your feelings. I'm not politically correct in this feature, so go ahead, judge me."
Read? Does Your Account Size Matter? - Part 3
Read? When you have money, what would you do with it?
Read? Preserving or building wealth? That is the difference!
Have you read and understand the above three posts?
Why?
Because I am going to do another BIAS post and it may raise your blood pressure when you read liao buay song.
Understanding the importance of Retained Earning by company
Same picture but different Bunnies so different story.
This time ..
Bunny Growth on the Left side and Bunny Yield on the Right side.
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S-REITs and other high dividend payout ratio (90% or more) stocks
Bunny Y is showing off his impressive big big leaves to his fellow Bunny G.
Hey! Did you see my big big yield bor?
10% yield hor!!!
Don't play play!!!
Ya, above the ground, it is really impressive. There is no doubt about it. But, what we can't see is below the ground. Bunny Y's carrot is small small nia but Bunny G's carrot is so big hor.
What is this carrot below the ground?
Retained earning by the company!!!
It is what we can't see above the ground may actually be even more important and critical than what we can see and feel above the ground.
Retained earning is the undistributed profit that is poured back into the company to provide extra working capital. This extra working capital may even help company to reduce its dependency from borrowing more money or raising more equities to fund its growth strategies.
Fundamentally, we know that there are two common methods to value a company. One is through its future earning growth and the other is through its assets growth.
In short, year-on-year retained earning by the company is the fuel and catalyst to expand and grow the company's assets and business prospects without having to raise more and more equities.
And sooner or later, investors in this company will be rewarded by higher stock dividend and higher valuation of the company through its higher and higher earning and assets growth.
It is this year-on-year multipler effect of the company's retained earning and successful execution of its growth strategies using these retained earnings that will help to form the higher base for sustaining its higher and higher stock price over market cycles of gloom and boom.
It is how you become rich in stocks by holding multi-bagger high yield stocks over long run with the right position sizing with respect to your net worth!!!
BTW, nowadays it is quite common to read on bloggers talking more on the importance of dividend income and reits; but can't really remember reading something on retained earning.
Understand bo?
Posts
My blood pressure is rising. Must see doctor liao. Hahaha.. ;p
ReplyDeleteRead? Roads to wealth creation in the stock market.
There is room for diversity and some methods might work better for some people and at different times. ;)
CW8888,
ReplyDeleteSpot-on!
There's a different strategy for each season.
High yield plays are more "armour" strategies when we have accumulated a sizeable nest egg or when we are into our wealth conservation phase.
Having said that, nothing wrong with using a high yielding strategy. I use it to provide cash flow to pay for my living expenses. But I am under no illusion it will help grow my net-worth...
To grow, I use "firepower" strategies. It's not either or. Can blend one!
It like being an Apple employee. Should we opt for dividend in cash or stocks instead?
It may depend whether you prefer immediate or delayed gratification.
Hi SMOL,
ReplyDeleteYou are ever the voice of reason although frequently in an irreverent manner. Hahaha.. ;)
AK,
DeleteI am glad you are laughing!
Don't spoil my image. I am not an intellect; I'm the comedian.
I wonder why IKEA don't reward employees with stocks or stock options like tech companies. I could have retired much earlier.
Oh! I remember now. Not listed... @##$%&#$^^$#!!#$
LOL!
SMOL,
ReplyDeleteHahaha.. Why shouldn't I be laughing? There is room for diversity in our world and I have never once said that my way is the right way or, indeed, the only way.
Some might already have a very big root (think straight here) and would like to have a bushy (again think straight hor) bunch of leaves. Some might have a smaller root but would still like to have a bushy bunch of leaves. Some might like to grow their roots bigger... ahem. Hahaha.. Personally, I am happy with both my root and my leaves. ;p
As long as everyone grows richer and is happy with their results, good. I am not dogmatic.
Aiyoh, you so humble. You are crouching tiger, hidden dragon. You good. ;)
Oh, you worked for IKEA? I didn't know that. I find the founder's story very inspirational. Shows us what hard work, thrift and honesty can do for a person.