This article was first published in my DT Sunday Weekly Newsletter here.
I was in Brunei last month… And boy, what an experience!
Shared the power of dividend investing with a crowd of amazing people. And it was just electric.
I left the workshop deeply inspired, and I want to share some of my biggest takeaways with you…
Here’s some of my favourite that stuck with me:
1. Get serious about investing – not speculation
If you want to make real money in the stock market, don’t gamble.
Investing isn’t about chasing the “next big stock”. Instead, what you need to know:
- How much you’re investing
- How long you’re investing
- What you’re buying
- What costs you’ll incur as an investor
- And the returns you want to achieve
You don’t want to buy stocks in a haphazard way. In my opinion, you want to invest in a sensible way.
In case you missed my recent posts: |
2. Buy businesses with “habit-forming” products and services
Now, most of the best performing stocks across the world sell habit-forming products and services.
When a company makes something that keeps people coming back for more and having built a habit around…
It frees these companies from having to spend a lot of money to develop/invest in new products. And sends a bigger percentage of their revenues to shareholders — like dividends and share buybacks.
Think about this: McDonald’s, Apple, Bristol-Myers Squibb, and so on. They have created stuff that keeps customers “addicted” — even if these businesses raise prices.
And companies that have such traits tend to be long-term winners…
If we just keep our eyes open, it’s actually not that hard to find out which products and businesses will likely do very well in the long term.
3. The #1 indicator for dividends
The #1 indicator you need to know is whether the company pays free cash flow. Now, free cash flow measures how much cash a company produces from its operations minus capex.
No free cash flow = no sustainable dividend
A rule of thumb: If a company has more than a year of negative free cash flow – be careful.
You want positive, consistent free cash flow.
4. “10-12-10” Rule
By the end of ten years, how would you like to achieve a 10% dividend yield with an expected 12% per year returns?
During my workshop, I shared double compounding your dividends and share price would accelerate your financial goals.
Think of compounding your returns like rolling a snowball down a hall. As the snowball gets bigger, it accumulates more snow, which gets even larger… and gathers even more snow.
For instance, if you started investing with $10,000 at 30 years old and actively putting more money each year…
Over the next 25 years, you’d hit a potential S$1,173,973…
As you can see, long-term compounding produces extraordinary effects.
The longer you compound, the more powerful its results.
5. Buy only the 1% most important stocks
Today, there are ~54,000 publicly traded companies in the world. When you invest, you actually don’t need to buy all of them.
Heck, you don’t even need to own hundreds of these stocks.
The truth? Buy the top 1% most important stocks to grow your portfolio. Let this set in for a moment.
When you’ve the right system to invest, you’re put in turbocharged mode to avoid lousy stocks and pick only the most important, highly profitable stocks to accumulate your wealth.
6. Why I believe in a well-diversified portfolio
What most investors don’t understand is this: it’s only when you protect your downside, then you would have all your side.
To protect your downside means you bulletproof your wealth with a well-diversified portfolio – you compound your wealth safely and profitably this way.
Because different stocks behave differently at certain periods. Some stocks will outperform in one period. Some stocks will underperform in the next.
Which brings me to my last point…
7. How to be the next multi-millionaire next door
I opened my workshop with this story that has always inspired me to keep on keeping on. This is the most important thing I shared.
If you’ve missed or ignored what I’ve said earlier, then you’ve to remember this…
Ronald Read didn’t have a fancy degree. He worked over 17 years as a janitor at JC Penney, a shopping mall. And he also worked as a gas station attendant.
When Ronald Read passed on at 92 years old, his family was shocked to discover he left behind US$8 million – most of it donated to a local hospital and library.
You see, Ronald Read has amassed a huge fortune over the years in dividend-producing stocks. He avoided companies he didn’t understand. He lived frugally and held on to stocks for decades.
The thing is, you don’t need a fancy degree, or working in an investment industry to achieve financial success.
I’m 100% convinced anyone who understands simple math and has a modicum of emotional stability can invest profitably. And only if you take that next step.
Which of these resonate with you the most? Drop me a reply!
By the way, if you want to get started investing, check out my free resources here.
P.S. Also, I just want to say a BIG thank you to Baiduri Capital and for inviting me down. Special mention to Kun Yu for arranging all this 🙂
What an amazing team at Baiduri Capital!
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
