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1 hour ago
Monday 28 January 2019
What Is Your True Holding Power Across Volatile Past And Future Market Cycles???
1) Our money i.e. a bigger war chest
Our holding power in term of money will ease our heartache while receiving doses of Panadols during bad times and smiling during good times and giving us the right to brag during CNY gathering among friends and relatives - "I told you to invest! You no listen"
2) Our yield on investment cost e.g. high single digit or double digits dividend yield on cost
During good times in our FIRE, FIRe or retirement phase; we can't live off those paper gains in our investment portfolio; but during bad times; we will still be receiving dividends but just smaller!
What is our true holding power across volatile market cycles? Money or yield?
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Both is best :)
ReplyDeleteHigh yield .... need to buy a basket of strong moats dividend-growth companies at low-to-moderate valuations .... and hang on for years & decades. It's a game of patience .... longer you hold the better, provided the companies maintain their strong moats! LOL. Need strong conviction & analytical skills to be able to re-invest dividends or keep putting new money into these companies as well.
Money as security blanket .... have liquidity / living expenses fund for the shorter term (1-3 years). Frankly, any expected expenditures for the next 3 years (or even 5 yrs) shouldn't be in stocks or other risk assets.
Money --- should also build up warchest during good times e.g. saving up a portion of dividends; using appropriate overbought indicators to harvest some paper profits; using appropriate trend indicators that you're comfortable with to prevent losing too much profits + capital back to bear market or serious corrections.
Trend indicators --- also need to know when to buy back in or scale in as well.
I personally try to use the money methods above. But too impatient for the Yield method haha! And also too lazy & too stupid to analyse & monitor those individual companies. :P
Money can buy laziness and over ride impatience. Money can buy many thing. Lol!
DeleteWithout incurring income from full-time job it is even more critical to keep a few years of rotting cash to fund household expenses and to ride over the next bear market to deploy war chest.
Deletevery short-term investors are traders
Delete