Sunday, August 12, 2012

How did Dividend Warrior build his 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

15 comments:

financiallyfreenow said...

Hi,

Nice write-up! If I had $50k and there is a market crash, I would load up on stocks that are fundamentally strong along with good dividend yield of more than 6%.

Ah John said...

2014 maybe another bad year, so good timing to buy stock again. Btw, start to enjoy life a little bit, money never enough.

SI@SG said...

Hi DW,

I discovered a lot of similarities between you and me! I was also from the civil service and was equally grateful the government paid my uni fees. I started building my portfolio from scratch too without any financial help from family. hee.... But you younger than me. Haha. Well done!

If I have a windfall of s$50k awaiting, I will spend time from now til then to do very in-depth studies on a few stocks to increase my probability of achieving a profit. When the money is received, I'll buy those in bulk if their valuations and yield are good. :-)

Anonymous said...

I would only invest 15k on undervalued stock and hold on the cash for unexpected events then maybe buy good stock with good dividends.

However US election coming this year so really not sure how the market is going to move but I guess be careful!

I realized people are generally fearful now

pie

Anonymous said...

HI DW,

How many percent of your income do you save in a month?

I can relate to you during 2002 to 2008, however I did not buy dividend counters but bought S shares. Suffering a huge loss now.

Can you give me some advice what to do with my S shares?

If I had 50k, I would buy REITS too, but currently all the REITs are quite expensive right?

Ah John said...

Currently, I don't think many stocks to buy, buy at low is most important, for safety and return rate.

ocz said...

Saving 50K in a year+ with $3K pay?!
Truly frugal lifestyle.
No offend there, I'm an engineer and live a similarly frugal life. But not saving as much due to family commitment. I started (more serious) investing around the same time, but only adding more positions in dividend stocks last year after reading and following blogs like this one by DW. Your portfolio is an inspiration for me.

For the 50K, I would keep 1/5 in cash (Mental issue. it always worries me for not having cash), put the rest into investment fund and wait for good opportunities.

Anonymous said...

I cannot fathom how much cash u have! In addition to your cash and stocks of ~S$200K, u still have another S$50K?!!And u r under 30! Do you have any other "hidden" assets?!!

Ansel

Epps said...
This comment has been removed by the author.
Epps said...

If I have 50K lump sum, I would spend 2k on myself, and invest 48k into a Permanent Portfolio consisting of 25% each of stocks, long term government bonds, gold and cash. Asset allocation looks unconventional, but there are actually good reasons for such allocations to provide consistent portfolio growth and protection during economic cycles of prosperity, inflation, recession, and deflation. The 25% cash will also act as my fund for major expenses as well as bullets for cheap asset acquisition.

Mikegavone said...

I like your blog and hope to have enough time one day to regularly post on my own.

Just wondering, have you considered selling covered calls against your positions? This way you collect a premium plus the dividend. I like that strategy because it increases the cash flow you receive while lowering the cost basis of stock you were going to hold anyway. It's especially beneficial if it's in a tax deferred account.

Anonymous said...

Your salary is the main source of income during the early days.
3K per month allows you to be able to save up to 50K which in turn give you the captial to invest more in the stock market.

But for people with salary less than 3K per month like me, i only earn 2K per month.
My captial is less than yours. It is harder to achieve your standard now. 6K in dividend per year..

Anonymous said...

conventional wisdom of investment doesnt seem to work during such unconventional times, esp in the years ahead, diversifying in stocks or risk free asset esp treasuries which is in a 300 year bubble does not appeal to me

Sean Centric said...

Few options for me =)

Use half of 50K to buy Pamp Suisse Gold bars from UOB during the lows* & keep them while using $25,000 to down for an apartment preparing for rental yields.

Or..locate a significant product/service & erect a MLM empire building... =)

Sean Centric said...

Lastly, as Warren Buffet & Robert says...only to diversify in different asset classes, not paper within paper ,

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