Sunday, September 12, 2010

Keep it simple in the Golden Tiger Year

Here is something written by long time ST journalist Goh Eng Yeow. He has a very convincing case for the buy-and-hold strategy in stock investing. Nonetheless, I believe that it would have been better if he told his story from a portfolio perspective. The key points to this piece is that you should go for quality stocks and also use the dividends and distribution for reinvestment purposes.

By Goh Eng Yeow

Past Tiger Years have marked milestones in my life and it is with anticipation - and some trepidation - that I await the arrival of the Golden Tiger Year next Sunday and what it might hold for me.

I started working in a Tiger Year - 1986 - just as Singapore was fighting off what was then its worst economic slowdown since it achieved independence 21 years before.

That calamitous experience shaped my working attitude for life. Jobs were scarce, and even graduates with good grades were competing for jobs which paid them less than $1,000 a month.

The uncertainties encapsulated for me early on the importance of setting aside some savings every month for the proverbial rainy day.

Around this time, I was introduced to the joys of investing, quite by chance, when I bought 1,000 Singapore Bus Services shares in order to qualify for the concessionary bus passes which the transport company had offered its shareholders.

I have kept the investment until now and it has multiplied due to stock splits and bonus issues over the years to 16,040 ComfortDelGro shares, as the company is now called, and 1,200 SBS Transit shares.

The next Tiger Year - 1998 - coincided with the Asian financial crisis which bankrupted businesses across Asia as they struggled to cope with the plummeting Thai baht and Indonesian rupiah.

Ordinary investors like myself found it agonising to watch our painfully accumulated nest eggs dwindle to a fraction of their original value as blue chips were lashed by the crisis hitting the region.

At that time, I had in my possession some shares in the now defunct Overseas Union Bank (OUB), which I had bought a decade earlier. As OUB's price plunged and the value of my investment fell by half, it badly shook my belief about buying blue chips to keep as long-term investments.

Fortunately, there was a happy twist to the story. Investors who kept faith with OUB during those dark days were compensated handsomely when United Overseas Bank (UOB) bought the bank for $10 billion three years later.

As I await the arrival of yet another Tiger Year, I find myself taking stock of the hits and misses in my investment portfolio, as the market succumbs to fresh turmoil due to fears that some European countries may default on their debts.

'Buy and hold' has always been my approach and it has worked well despite the three major financial upheavals in the past 15 years - the Asian banking crisis in 1998, the bust in 2000 and the United States sub-prime crisis in 2007.

Squirrelling away money into high-dividend-paying counters such as Hong Leong Finance and Cerebos Pacific has reaped huge rewards. For a few investments, I have more than recouped my initial capital outlay from the accumulated dividend payouts over the years.

As a conservative investor, I find that it pays to stick to a few simple objectives like realistic investment expectations and a reasonable timeframe to give the investment time to work out.


  1. Once the initial capital outlay is recouped either through accumulated dividend payouts over the years or partial realized profits or both, one can comfortably choose to leave it alone for future dividends and capital gain. In another word, don't expose our capital for too long in the market, anything can happen.

  2. okay so assume you invested one dollar and your portfolio increased to two dollars, you sell to get that one dollar or do you still leave in the market?

    i am getting a bit confused here so sorry

  3. Read?

  4. hey, i read that. from what i gather, once you have made enough profit from your trades, then you start to invest with the profits that you have made? this is so-called using the free money that you have to make more money while not risking your capital.