What will DW do if the market crash?

Another Q&A session with DW. Yay! Quite a few readers have asked me what I will do if the market crash. So, this is my plan (sort of). I better put a disclaimer right now. 

*Disclaimer: The plan below is suitable and comfortable for myself. Some parts might suit you too. I am not a financial advisor or guru. Please evaluate your own financial situation and act accordingly.

Step 1: Prepare an Armageddon Fund
Prepare yourself. Save up an Armageddon Fund. This is the sum of money that you can use for investment when the markets crash (>30% drop). Do not confuse this money with the Emergency Fund. The money in the Emergency Fund should only be used in the event of unforeseen emergencies (retrenchment, surgery, accidents etc.) Personally, I have 3 months worth of salary as my emergency fund. 

I have an Investment-Linked Policy (ILP) maturing in July 2014. This product is a joint effort between UOB and NTUC Income. So, this lump sum of $50k will turbo-boost my Armageddon Fund. UOB and NTUC Income are unlikely to collapse anytime soon, so I am confident of getting my money back in 2 years time. ^^

Besides having the power to buy cheap stocks/ average down during a market crash, the Armageddon Fund can also give you confidence and peace of mind. You will not panic as much when everybody around you are screaming "Sell! Sell! Sell!". With a calm mind, you can make better decisions. 


Step 2: Invest in Quality Dividend Stocks
"What? Invest in dividend stocks? But the prices of dividend stocks will also drop during a market crash!"

Exactly!

Since the prices of all stocks will drop during a market crash, why not have stocks that pay dividends? Firstly, the dividends will help to cushion the temporary price drop. The market is not going to crash forever. Secondly, dividends can also help to support the stock price once the yield becomes attractive. Lastly, market crashes do not happen every year. It usually happens in intervals of 8 to 10 years. Within these intervals, the amount of dividends you accumulated will be significant enough to compensate for the price drop.

You may ask "But what if the company cuts dividends or worse, stop dividends completely?"

Simple. Choose those solid bluechips that will not cut or stop dividends during a crisis. Let's take Singtel as an example.

Dividend History of Singtel:
2008 (sub-prime crisis) - $0.125 per share
2009 (market bottom + H1N1 epidemic) - $0.125 per share
2010 (market recovery) - $0.142 per share
2011 (Japanese Earthquake + Euro debt crisis + Arab Spring + US credit downgrade) - $0.158 per share + special dividend $0.10 per share = $0.258 per share
2012 - $0.158 per share

Peace Out,

Dividend Warrior

August 2012 Singapore Dividend Portfolio Update

Total dividends collected in 2012	S$5990.65
Total Invested Capital	S$135,703
Projected Annual Yield (2012)	6.8%
Average Monthly Dividends (2012)	S$748.83
Available funds for investment	S$0

Paper Gain / Loss (S$)

S$28, 100

For the month of August, I received a total of S$2034.69 in dividends from Singtel, M1, Starhub, CapitaMall Trust (CMT), Frasers Centrepoint Trust (FCT), Suntec REIT, First REIT and CACHE. 

1) Singtel - S$540

2) M1 - S$330
3) Starhub - S$500

4) CMT - S$166.60

5) FCT - S$104

6) Suntec REIT - S$141.66

7) First REIT - S$193

8) CACHE - S$59.43

My portfolio's unrealised paper gain is around S$28k. The latest bumper crop of dividends boosted my monthly passive income this year to around S$748. 

Due to popular demand from my readers, I have finally added a new column called "Annual Yield" into my spreadsheet above. The highest-yielding stock in my portfolio is AIMS AMIP REIT (10.3%) and the lowest-yielding one is IHH (0%).

Latest Additions:

After 2 months of complete inactivity, I decided to go on a buying spree. It is time for my portfolio to cross the S$130k mark. However, I do not intend to buy stocks just for the sake of buying. If you have read my previous post, you would know that I am looking to add more medical stocks. Therefore, I bought 4 lots of PLife REIT (price dipped after XD) and 3 lots of IHH. I bought PLife REIT for the regular cash distributions and IHH for its future growth potential. 

Lastly, I added 3 more lots of FCT because I believe the DPU will increase when Causeway Point Mall completes its renovations by year end. This latest buying spree has totally depleted my opportunity fund. My aim is to expand my portfolio to S$150k by year end. Ha!

Peace Out,

Dividend Warrior

How Did Dividend Warrior Build His Dividend Portfolio?

It is time for another Q&A session with Dividend Warrior! In this post, I shall explain how I managed to build up my dividend portfolio. It is gonna be a long post. 

2002 to 2008: Poor student and NSF
During my NS days, I served in a stay-in unit, so I was able to save up a few thousand dollars. During my undergraduate days, I did some part-time tuition to support myself. I managed to save up a little. I was bonded and so the government paid my school fees. I graduated from University in 2008 and started work immediately with no education loans. My starting take-home pay was decent, around 3k/month. I started saving like mad because I came from a low-income family and I really want to achieve financial freedom as soon as possible. I am tired of being poor during my childhood and teenage years. 

Since young, my parents have told me horror stories about the stock market. They told me people were committing suicide due to stock market losses. They told me to put my money in a bank account and earn interest from it. I think they were freaked out by the Asian financial crisis in 1998 and the dot.com bubble bust in 2000. At that time, I shared their concerns and fears. Therefore, I was so glad that I was safe and sound when the sub-prime crisis hit the world in 2008 year end. I was having my popcorn and watching the carnage from the sideline as Lehman Brothers collapsed and AIG was on the verge of collapsing too. Banks were receiving bailouts. The stock markets were crashing hard. 


2009 mid-year: Market Bottom
In 2009, the US automobile industry was going to collapse too. The H1N1 virus struck the world. Governments all around the world were trying desperately to pump money into their dying economies. People were losing their jobs. Global markets reached a bottom.

By this time, I managed to save up around $50k. I also received my first pay increment and bonus. Being cash-rich, I felt good about myself. However, there was a problem. The inflation rate (4% - 6%) was increasing way beyond the almost non-existent bank interest rates. My money was losing value fast! I started to look for alternative investment products from the banks. I went to UOB and got myself an insurance-investment product. This product pays me 6% over a period of 6 years, capital protected. This product was a combined effort between NTUC and UOB. I plonked my $50k hard-earned savings into it. I continued my hardcore saving habit. No vacations, no car, no house, single. 


2009 year end: Doing the unthinkable
I started reading financial blogs, forums, websites and books. All these finally triggered my first foray into the stock market. Starhub was my very first stock. My mom almost strangled me to death upon knowing my investment. 

But I held on to my belief. I knew it was risky, but I felt the dividend investing method really suits me. My aim is to go for quality dividend stocks and REITs for stable passive income. No S-chips!


2010 - 2012: Powering on
Between 2010 and 2012, there were the Japanese Earthquake/Tsunami/Nuclear fallout and Euro Debt Crisis/Drama/Saga. I kept adding, tweaking and strengthening my portfolio during dips. I think my portfolio has finally stabilised this year. I am satisfied with the performance of my core holdings. I am so glad I started on this dividend investing journey. Unfortunately, I should have used that $50k in 2009 to buy more dividend stocks. T T 

This experience taught me to be "Greedy when others are Fearful". My $50k policy will be maturing in 2014. So, that is something to look forward to. I will probably invest half and save the rest. 


So, what will you do if you have a lump sum of $50k? Comment below. ^^


Peace Out,
Dividend Warrior

Let Your Portfolio Ride on The Grey Tsunami

Before I proceed on to my new post, I would like to express my gratitude towards the supportive comments on my previous post. I really appreciate it. Thanks guys! (and gals?) That particular post might portray me as raging furious. But I was actually rather calm when I was typing. By the way, I realised I forgot to mention something important. I am NOT saying that dividend investing is the 100%, absolutely correct, perfect, ideal, safe, risk-free and flawless way of investing. It is suitable for me but it may not be suitable for you. So, it is totally fine if you do not follow my dividend investing style. You can still visit my blog for casual reading. Hehe :P

Alright then, let's get back to business. I am going to take my portfolio in a slightly different direction in the next few months. 

A Grey Tsunami Is Coming:

The populations in Asia are aging rapidly. A massive social demographic change will be taking place over the next few decades. According to a research done by United Nations in 2001, the number of Asians age 65 and above will increase exponentially from 207 million in 2000 to 857 million in 2050. 

The rise of the middle-class families in developing countries like China and Indonesia will fuel the medical travel sector too. Increasingly affluent patients will demand better healthcare services because they can now afford it. For example, many rich Indonesian patients do not mind forking out more money to seek better medical treatment at Mount Elizabeth Hospital in Singapore. 


Riding on the Tsunami - Buy Quality Healthcare Stocks in Asia:

IHH Healthcare Berhad comprises premium-brand healthcare assets, collectively representing a unique multi-market investment position in the healthcare sector. For more information, please visit their website at http://ihh-healthcare.com/our-businesses/brands-and-portfolio

Raffles Medical Group (RMG) is a leading medical group and the largest private group practice in Singapore. As a fully integrated healthcare organisation, the Group owns and operates a network of family medicine clinics, a tertiary care private hospital, insurance services and a consumer healthcare division. Patients of the Group enjoy a continuum of care, from having their most basic healthcare needs met through the Group’s islandwide network of Raffles Medical clinics, to specialist and tertiary care at Raffles Hospital. For more information, please their website at http://www.rafflesmedicalgroup.com/our-services/our-services.aspx

Implications for my portfolio:
When the Asian grey tsunami hits in the next few decades, I want to be ready to take advantage and profit from it. In fact, I am going to start the foundation now. So far, I have been investing in dividend stocks over the past 3 years. It is time to tweak my strategy and go for healthcare stocks. Anyway, the prices of quality blue-chip dividend stocks have been skyrocketing and my spare funds are idling (rotting) in the bank account, earning next to nothing in interests. 

My Singapore Dividend Portfolio consists of just one "medical-related" stock, First REIT. It makes up around 6% of my portfolio. However, it is a REIT and not a pure healthcare stock. Therefore, I will be looking to invest heavily in IHH Healthcare Berhad and Raffles Medical Group in the coming months. If Parkway Life REIT dips after XD, I will also be keen to add some. I want my portfolio to comprise of 20% healthcare stocks in the long run. 

My Global Dividend Growth Portfolio also consists of just one healthcare stock, Johnson & Johnson. It makes up around 20% of my portfolio. I am comfortable with that. 

So, any healthcare stocks in your portfolio? What do you think of my new direction? Comment below. ^^


Peace Out,
Dividend Warrior

Laziness Fuels My Motivation To Achieve FIRE

Since I started this blog 2 years ago, I have received my fair share of hate mails. Recently, the hate mails seem to be increasing. I will try to address this issue once and for all. If you do not want to see me raging, please do not read on. 

Criticism 1:
"If everyone is like you, only dreaming of attaining financial freedom without doing any serious work, Singapore's future will be in trouble. I wonder why youngsters nowadays are so lazy and unwilling to put in honest hard work like the older generations......"

Reply:
First of all, let me make something clear. I completely admire and salute those people who have to earn a living through their own blood, sweat and sometimes even tears. More power to them. Some of them have to wake up before the sun comes out and return home only when the sun goes down, doing back-breaking jobs. However, that is not my personal preference. So, yes, I admit I am lazy. It is my laziness that motivates me to build up a dividend portfolio for passive income. It may not be your goal but it is mine. So, you can go ahead and be the shining role model for everyone, by working really hard. 
Next, what do you mean by "youngsters nowadays"? C'mon. Investors like Warren Buffett have been doing their stuff over many decades! LOL! I do not think dividend investing is invented just recently. 


Criticism 2:
"$118k portfolio at an age of 29? Really? I am a millionaire then."

Reply:
Well, I do not understand what is so unbelievable about my portfolio. $118k is not THAT huge. Is it jealousy? I do not know. There are so many other investors with much larger portfolios than mine. So, as proof, here is my CDP statement below. I am sure some people will say it is photoshopped. If that is the case, I have nothing more to say. 

Criticism 3:
"Your blog has no substance at all. Not really useful for me."

Reply:
Yes. You are absolutely right. My blog has no substance, no practical use. I am not an expert or guru. In fact, I often wonder why people bother reading my blog. 


Rant Over (for the first time),
Dividend Warrior