I was on the BBC this morning to talk about the latest visitor arrival numbers to Macau. They mean a lot to not only to the casino operators there, but they could also be pivotal to the health of the Special Administrative Region of China.
Over the Chinese New Year holiday, the number of tourists to Macau dropped by more than 70% as a result of the Wuhan virus. These brief-stay visitors can account for as much as 6% of gaming revenues for an entire year. So, a drop in inbound tourists of that magnitude can severely dent profits at the city’s gambling dens.
But it could mean even more to Macau, which has already seen three successive quarters of falling economic output. Macau is already in recession. The festive Chinese holiday could have pulled it out of another three months of misery.
Of course, things can turn around quickly….
…. But wouldn’t it be better if Macau was not so heavily reliant on just one particular industry? The answer, surely, has to be an unequivocal yes. Macau needs to diversify. However, it can be hard to diversify when that particular industry has served it so well in the past. The average Macanese is nearly 18 times richer today than 30 years ago.
The same can be said about our investments. We need to ensure that our portfolios are properly diversified, which in my case, namely, that of an income investor, means multiple and unrelated revenue streams.
It is surprisingly easy to do, if you are prepared to put in a bit of time and a little bit of effort.
I have, over the years, constructed numerous portfolio that function both separately and jointly. Each portfolio is unique in so far as it can be operated and managed on its own. But at the same time each portfolio is an integral part of a wider collection of shares, too.
Consequently, when my Asian financials might be underperforming, my global properties portfolio could outperform. When my Malaysian-focussed portfolio could be doing better, my Asian consumers has done better.
But whatever happens, the dividends generated from the portfolios should continue to grow….
….Those rising dividends are crucial, which is why it is important to select our shares with care.
Don’t play roulette with your investments. If we choose our shares carefully, we could sleep well at night. And I always manage to get a good night’s sleep, regardless of what happens in the markets.
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Disclosure: David Kuo does not own shares in any of the companies mentioned.