04 Oct Get Smart: Investing Lessons from Bugis
Everyone has their own favourite lunch spot.
For lunch one day last week I had a plate of some of the most delicious Roast Duck and Rice at an eating house on Beach Road….
…It was then a quick walk around the corner to Liang Seah Street for a bowl of authentic Green Bean Soup for dessert….
…that was followed by a cup of freshly pulled Teh Tarik at a Kopi Tiam on North Bridge Road.
Welcome to lunchtime with Kuo.
Scuttling from one eatery to another might seem a little bizarre for people who are not familiar with the eating habits of Singapore diners.
But it is really not that big a deal for us to visit two or more food outlets when we go out for a meal.
It is partly because of the vast choice of good food outlets that we have here in Singapore.
It is partly because of our discerning palate.
It is also because it is relatively easy to get from one eating place to another.
We know what we want and we know where to get it.
Many of us recognise that whilst a particular restaurant might be good at preparing, say, roast meats, it might be a challenge for the same kitchen to dish up appetizing desserts.
Investing is a lot like that too.
When we invest, we often find that it can be rare for a company to deliver, say, both capital growth and dividends simultaneously.
Consequently, we need to root around for the best offerings.
Here in Singapore, we can choose from a plethora of stocks for our portfolios.
In fact, there are over 600 listed companies on the Singapore market. That’s quite a collection of companies.
That’s not even counting those outside of Singapore.
So, it is important to be discerning. It is also important to consider how a single stock could fit into our portfolios.
Real Estate Investment Trusts (REITs), for example, could be a good source of regular income. They might not be as good at delivering capital growth, though.
So, knowing why we might want to own a particular stock is vital.
Compare and contrast
Let’s say we buy a stock for its dividends.
One of our many considerations should, therefore, be how the payout compares with the yield on other asset classes.
We might also want to consider if the company is capable of generating a good return on shareholder funds.
Additionally, we might want to look into whether it has grown and could continue to grow its dividends.
Those should be some of our main considerations.
We should approach growth stocks in a similar fashion.
Focus on the things that matter. That could mean considering companies that are inexpensive relative to their potential to grow.
What’s the story?
Try to look for a storyline to follow too. That can be a good way to monitor the company’s progress.
Consider also businesses that are not burdened by onerous loans because companies that have no debt can’t go bankrupt.
But there’s more.
Just like how I went from one place to another to sample different dishes, we need to combine those good companies in a meaningful way that will deliver stable income and growth for us.
That, in essence, is how you construct a successful investment portfolio that can both grow and remain resilient during tough times.
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Disclaimer: David Kuo does not own shares in any of the companies mentioned.