Things to know for stock investment – Chapter 2

Chapter 2 Stock Selection

Picking of stocks from the stock market. If you are to start your first investment, I would like to share some simple knowledge to help start with.

There are many different industries of stocks available in the market. Personally I started off with REIT industry in early 2015.

REIT refers to Real-Estate Investment Trust and they typically offer high dividends yields, and usually it range from 6-10% dividend yield yearly. Keeping your savings in Singapore bank will probably earns you maximum of 1.83% to 2% of your savings annually. Thus, it is more attractive to invest in stocks that has higher dividend yield than what bank pays.

But do note, investment involve in risk, keeping your savings in bank definitely has a lower risk. Please also note that under the deposit insurance, it insured up to $50,000. I recommend you to start invest young at small value. Golden Rule no. 1 never place all your eggs in the same basket. You should have set aside of savings in bank in case of rainy days and the rest can be place in investment to help to facilitate in retirement in the near future. At least 6 months of you salary should be kept in bank untouched.

Other than earning from dividend gain, you can also look for stocks that will gives capital gain. Stocks that has potential of growth where business are expanding and doing well will attract investors thus, driving up the share prices. If you buy at a lower price and sell when it went up, you will be earning the difference as capital gain.

There are 2 type of analysis in investment to learn to identify which stocks you should buy/sell at a particular price. They are the Technical Analysis and Fundamental Analysis aka TA & FA.

Before you truly start investing your hard earn savings always ask yourself fundamental questions:

  1. What is your objective to invest? Dividend gain or Capital gain?
  2. How much are you willing to lose?
  3. Short term trading or long term trading?
  4. Set Dividend gain margin (>6% for me)
  5. Set Capital gain margin (>20% for me)

Golden rule no 2, don’t greed. There are always ups and downs, as long as you earn the margin you set, take profit and move on. Do not wait to see how next day. Golden rule no 3, money in own pocket is the safest! As long as you don’t sell off your stocks, all value are paper value, is the moment where you sell than it will turns to physical dollars and cents.

My objective is to invest and roll my savings for my future use and needs when it comes to my retirement. I started to know the importance of investment as age 24 when I graduate from NTU. I started working and bought the AIA investment plan, and only engage with stocks only at the age of 26 and started small 10 lots for Lippo mall trust which is Indonesia reit. It’s dividend yield of 6.8-7% annually and that’s what I am looking for.

I bought it at the price of $0.355, and after my buying, it drops over the years to as low as $0.28. With it’s dropping, those who had funds can average down since the dividend pay-out remains high. But I only started working and paying off my school loan, I didn’t had so much funds so I left it and keeping the dividend. After keeping it for 1 year 8 months, it went up to $0.40 and that’s the point I decided to sell off to take the profits.

I learn is all about patience, never get too agitated and emotional over the stock prices. If it went up, it definitely will come down and vice versa.

There is this link to check on the stocks dividend track records..

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