Investment Strategies, part 1

I will post a few stock investment strategies start from today. First of all, I want to enforce again, there’s no such thing as sure win strategy. If you win more than you lose, then you are a winner. Secondly, don’t just “plan”, “think”, “wish”. Put your idea into action, the stock market will teach you faster when you learn from your mistake. Different strategy may suit different people. You really need to try and see which strategy suit you more. Thirdly, it is really important to learn “good investment habit”, e.g. cut-loss, or follow your plan. Don’t cheat yourself. When it hit your exit point, then follow your plan to exit. Don’t cheat yourself that “my plan is for long term”. Lastly, Good luck. Remember, investment is just a tool to increase your wealth. Your core should still be work hard in your job.

First strategy is雪球股(snow ball stock), by 溫國信. (you can google “溫國信” to find his book)

Summary:

Find a stock that can give you 6.25% dividend yield. Re-invest the dividend received. So, based on the chart below, you will get 20% return (total) in 3 years. The longer you hold, the higher the return. The key is, re-invest the dividend. The “time of holding” is a “slope”, your capital is the “snow ball” and the dividend is the “snow” on the “slope”.

Steps:

(1)    Find a basket of good companies that can pay consistent good dividend.

For example, the dividend yield of AscendasREIT(A17U), the dividend paid for the last 5 years(in cents): 15.64 , 13.60, 12.69, 13.33, 14.18

(2)    Calculate the average dividend paid for the last 5 years.

The average is (15.64+13.60+12.69+13.33+14.18) / 5 = 13.89

(3)    Use the following formula:

Reasonable price = average dividend x 20 /100

Cheap price = average dividend x 16 /100

Expensive price = average dividend x 32 /100

So, for AscendasREIT:

Reasonable price: 13.89 x 20 = $2.778

Cheap price: 13.89 x 16 = $2.222

Expensive price: 13.89 x 32 = $4.445

Why use the number 20, 16, 32? This is because 1/20 = 5% dividend yield, 1/16 = 6.25% dividend yield and 1/32 = 3.125% dividend yield. So, if you use dividend paid x 16, it will give you dividend yield of 6.25%.

(4)    Buy the share when the price is between "cheap" and "reasonable". 
(5)    Re-invest the dividend received. Observer and hold.
(6)    You can sell the share when the price is "expensive" for capital gain.