27 May 2014

Journey through the ages - is 20% good?

It has been a fascinating, and at times exciting, journey. Initially, I had only invested in insurance-based schemes. Be it whole-life endowment plans or investment-linked policies (ILP). Work, work, work was otherwise all I focused on. Making ends meet from the salary I earned and saving money into the bank were pretty much the game plan otherwise. Marriage, housing, post-graduate studies and kids pretty much took up everything else I had.

Had it not been for the early years buying into the various ILPs, I wouldn't have much of an investment to speak of. Interestingly, I had the fortune of having taken up ILPs in the era post Asian Financial Crisis and it had generated quite a tidy sum. It came in handy when I needed the money to complement my CPF to buy my first home.

Then I discovered Fundsupermart. A small sum in its cash fund gave me confidence to take the next step - i.e. to invest into various unit trusts funds. As I read more and gained a better understanding of the concept of diversification, stocks and bonds, the unit trust funds I invested into became more systematically managed.
Then I discovered the tax benefits of the Supplementary Retirement Scheme (SRS). Voila! Max'ed out my SRS, minimise the tax I have to pay, and invest the SRS into unit trust funds at Fundsupermart. It's all too easy!

At the depth of the Global Financial meltdown, I saw my unit trust funds sink miserably. And I mean miserably. But I stayed faithful to the diversification plan with the confidence that the market will generally recover in the long run.  It has not disappointed.

In 2009, I assessed that there were many opportunities to pick up stocks. I must say I had a confirmation bias when I saw a video interview with Warren Buffet where he suggested that he was on the look out for things to buy. So started my stock picking journey.


After 5 years investing into the stock market, I did an analysis recently to see how I've faired. Turned out, not bad. Not bad at all. Using Excel's XIRR function, the internal rate of return showed 20.6% over the 5 year period investing in stocks. The stock portfolio, both from valuation uptick and from cash additions to the investment fund, has grown in leaps and bounds, from zero to hundreds of thousands in that 5 years.

Significantly, as I analysed the individual stock's performance, it is also clear that the dividends have been significant. Soon, the dividends alone would generate $1,000 per month of income. Of late, as companies try to preserve their capital, several have started offering Scrip Dividends (also known as Dividend Reinvestment) options which I have opted to subscribe to, and thereby increasing the number of shares that I owned of those companies.  I'm doing so with the assessment that these stocks are not going the way of the dodo bird over the next 5-10 years.

In many cases, the dividend yields have gone way beyond 4% compared to the original cost of the shares as many of these companies have consistently raised their dividends year on year. It sure feels *shiok* to see a stock that cost $1,000 generating an annual dividend of $100 per year and growing. Must say though, that there aren't as many SGX companies that behave like that compared to US stocks on the NYSE. The later have many more companies with a long history and consistent track records. Unfortunately, that also comes along with the 30% withholding tax.

Happy investing!

Where Lies the Portal to Wealth?
Pattern of Behaviour - A review of 2013


Anonymous said...

Solid return! Envious:)

Keep it up!

Lizardo said...

Thank you. I hope the IRR continues to remain healthy. Hope you're also having a positive experience.