Saturday, January 28, 2012

The importance of Investment Discipline and Dividend-paying shares

For some reasons, we humans like the adrenaline rush feeling running through our veins when it comes to entertainment, partying or investing. I went to the casino with a friend at the Marina Bay Sands (MBS) this afternoon, only to find those people who are at the table emotionless...or rather motionless. There were a mix of youngsters (in their 20s) - including myself and the Ah-peks & Aunties (in their 50 to 60s) and one thing in common of what all of them did after the dealer swept all their money away in the previous game was to put their money to a "hole" all over again...and this process repeats for 365 days a year 7 days a week and 24 hours a day.

P.s: I placed a bet at the Roulette table and lost S$100 after 5 rounds. Afterall, I am human too :)

When it comes to investing in the stock market, many times we involve our emotional feelings especially when it comes to periods of bull-run. We ended up buying high and selling low. In order to avoid these types of irrational choices that we made, we have to develop an Investment Policy, Mission and Statement of our own. A written policy like checking your goals in mind or writing a blog like this will help you stay discplined. It will also keep your emotions in check.

Another way to keep your emotional feelings in check is to stay away from the game and by that I mean staying invested in dividend paying shares. Dividend stocks are often not respected by people and they don't usually get the attention they need. If the majority of your portfolio are dividend paying shares, chances are you don't monitor the stock market daily - which makes it one of the major advantage of investing in dividend paying shares. Some of the other advantages of dividend paying shares are:

1.) Dividend Reinvestment Plan (DRIPS) - Don't hesitate to learn about the power of compounding. By compunding your dividends, you will be surprised how much your net worth will total over the long term. Your cash flow will eventually be so great through compounding effect to the point you will be financially free. This is very different from non-dividend paying stocks which you can earn money only by selling the stock.

2.) Sleeping Generating Money Machine - It gives you money even if you are sleeping at night, during the day or even when you have not woken up at 11am in the morning :)

3.) Good safe investment - Historically dividend paying shares have been good safe investments for tough times since most investors turn to investing in them to avoid having their portfolio hammered.

In short, we work hard, work smart and work in a discipline manner. Set a realistic goal and stay disciplined. You will be rewarded.

When a man tells you that he got rich through hard work, ask him: 'Whose?'" - Don Marquis


  1. DW


    I think your goals this year of having $700 dividend per month will surely be realized. I hope to reach you by the end of the year :p

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