Our flagship service, The Smart Dividend Portfolio is on the cusp of a key milestone.
The Smart Dividend Portfolio consists of strong, growing Singapore dividend-paying stocks.
In August, our most popular portfolio should surpass S$10,000 in cumulative dividends, a landmark achievement four-and-a-half years in the making.
How did The Smart Dividend Portfolio come to this point?
Let us start by telling you what the portfolio didn’t do.
Firstly, the portfolio did not time its entry into the market.
Secondly, it did not put all its eggs in the same basket, preferring to invest in a diversified collection of Singapore-listed stocks.
So, what did the Smart Dividend Portfolio do instead?
Three things, in our mind, stand out: getting started, taking your time, and patience.
Getting started in investing
When should you start investing?
With Singapore’s market barometer, the Straits Times Index (SGX: ^STI) or STI not too far from its 52-week high, it doesn’t seem like a good time to put your money into the stock market.
So, what does an investor do?
Here’s the hard truth: if you are investing today with the hope of the stock market going up from here, you’re out of luck.
And it’s not because the stock market won’t rise from here.
The real answer is no one knows what the stock market will do from here. In fact, the only way you will know with absolute certainty whether the stock market will go up from here is in hindsight.
So, investors are left with a conundrum.
What if you invest and the stock market starts falling from here?
Or what if you don’t invest and the market continues to go up from here?
There’s no answer to this question. Part of it is due to the unrealistic expectations investors have been made to believe that they need to guess the direction of the stock market in the short run.
You can’t, no one can.
But at least with dividend stocks, you know that you will start receiving dividends after you buy the stocks.
And dividends aren’t a consolation prize. They can make a significant difference to an investor’s overall returns.
Taking your time to invest
When the Smart Dividend Portfolio started, our timing couldn’t be worse.
Back in February 2020, uncertainty reigned.
To make matters worse, within a month of starting the portfolio, the STI plunged by 30% from peak to trough, one of its sharpest declines ever.
If you adopt the mindset of timing the market, you will be left confused about what to do.
But investors often forget that you don’t have to invest all your money at once.
You can take your time to put your money to work.
Back in early March 2020, the Smart Dividend Portfolio invested in Overseas-Chinese Banking Corporation (SGX: O39), or OCBC, shares at S$9.76.
Guess what?
Fast forward 11 months later, in February 2021, the same shares had barely budged, moving up by less than 8%. However, we noted that OCBC shares were trading at less than one time their book value.
The portfolio promptly doubled its position in shares of the local bank at S$10.52.
But wait, that’s not the end of the story.
In March 2023, three years after the first buy, the Smart Dividend Portfolio again added to its position, topping its allocation up at S$12.20.
Today, with OCBC’s stock price opening at S$14.81 per share on 29 July 2024, there is little to be unhappy about.
Hang on there, that’s also not the end of the story.
There is the matter of dividends which we have not talked about.
For instance, from 2020 till today, OCBC had paid out almost S$2.35 in cumulative dividends.
What’s more, based on the 2023’s dividend payout of S$0.82 per share, our original shares bought at S$9.76 are offering a yield-on-cost of 8.4% per share.
Not bad for not knowing where the market is headed next…
For not timing the market…
And for not stressing over when to invest.
Bottom line, we don’t have to know where the market is headed next to be able to earn satisfactory returns from stocks.
Get Smart: The Underappreciated Value of Patience
The key which brings all of the above together is the audacity to be patient amid a world addicted to instant reactions and know-it-alls.
Remember, we’re investors, not market forecasters.
So, let’s act like one.
You can always get started with a small amount and wait for better value points to appear before you invest again. The portfolio’s experience with OCBC demonstrates this stance.
We may not always be right in the short term.
But the nice thing about dividend stocks is that if you choose the right stocks, you get paid a dividend while you wait for better stock prices to appear.
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Disclosure: Chin Hui Leong owns shares of OCBC.
