January 16, 2012

My Stock Investment Philosophy

As mentioned in the previous article, I've started my journey into stock investment, starting from year 2010. When i first started, I invested into some hot stocks at that moment like all newbies. So over the next few months, I was basically trading from one hot stock to another without much objective and direction. Over time, there were times when i won some pocket money and lose tons more.

Infinite Wealth - Lai Seng Choy
Then, I stumbled into a book by Lai Seng Choy called "Infinite Wealth". This book will teach you HOW to select an investment grade stock and WHEN to buy your chosen stock. I personally find the criteria that Mr Lai used to narrow down the list of stocks for investment very useful. Since i consider myself a long term investor, I do not think the WHEN to buy section is really applicable to me too much. However, it is still a good read for traders. I highly recommend that you buy this book and have a good read. It's light enough for casual reading, but yet packed with useful information.

Over the past one year, I'm still trying to figure out the set of criteria that is working for me, as well as the type of stocks and risks that I'm comfortable with. There will be lots of finetuning over time to find out the best methods that works for me.

As of know, my investment philosophy is as below:

To invest in growth dividend stocks with dividend yield of at least 5% as well as REIT stocks.

Sound conflicting to combine both growth and dividend paying companies? To me, dividend paying companies is only sustainable if there's growth in terms of turnover, profit and margin. That's why i coined the term "growth dividend stock".

Why 5%? I think a 2% extra dividend on top of 12-months fixed deposit rate is justifiable due to the risks we're taking with stocks investment.

So, there you go about my stock investment philosophy. With the stock investment philosophy, it serves as a guideline/filter for each of my stock trades. In the future article, I will list out the set of criteria that I use to filter through the dividend stocks. Stay tune!

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