When people ask me if I was ever tempted to sell during the Asian financial crisis, the dot-com crash, the global financial crisis, or COVID-19, my answer is blunt: not a tiny bit.
Look back at every single one of those seismic events.
Has the market recovered? Absolutely.
Every major sell-off so far has been followed by a recovery, because companies exist to do one thing: generate profits for their shareholders.
Think Like a CEO, Not a Speculator
If you want the conviction to hold through market storms, stop acting on broker tips.
Put yourself in the shoes of the CEO or CFO.
Ask yourself: What is this business going to look like in 10, 20, or 30 years?
If you had applied that test to Singapore’s major banks two decades ago, you would have done very well.
Sure, during the depth of the 2008 crisis, you might have panicked and wondered if local banks would collapse like Lehman Brothers.
But if you focused on business quality rather than headlines, you knew they would come through.
The 60-30-10 Rule
You aren’t going to make 20 mistakes out of 20 stocks if you do your homework.
To build a resilient portfolio, I follow a simple framework:
- 60% Income Stocks (12 stocks): Reliable businesses generating stable, ideally rising, dividend income.
- 30% Growth Stocks (six stocks): Faster-growing businesses expanding for the future (which must still pay a dividend!).
- 10% Special Situations/Value (two stocks): Unique opportunities or turnarounds that don’t fit the first two buckets.
The “Naughty Step” Over the Sell Button
What happens when a stock breaks and stops paying its dividend?
You don’t need to panic and press sell.
Instead, put it on the “naughty step” – at the top of your portfolio pyramid – and give it time to sort itself out.
Businesses in transition often recover on their own, restructure, merge, or get bought out by a competitor.
I have a REIT in my own portfolio that was hit hard by COVID-19 because demand for its space dried up.
Management is currently selling off assets to right the ship.
It isn’t bankrupt; it is simply sitting on the naughty step until it stabilises and resumes its role as an income generator.
Because the other 19 stocks in your portfolio are continuously churning out dividends, you won’t be stressed about one minor setback.
In fact, a well-constructed income portfolio eventually throws off so much cash that finding new places to invest it becomes your biggest headache.
Get Smart: Conviction Beats Market Volatility
You don’t need a sell strategy when you have a sound buying strategy.
By focusing on business quality, proper diversification, and steady cash flow, you can build a portfolio that lets you sleep soundly through any crisis.
Want to hear our full discussion on portfolio construction and managing underperforming stocks? Watch the complete video above.
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