Showing posts with label Uncle Chua portfolio and dividend income. Show all posts
Showing posts with label Uncle Chua portfolio and dividend income. Show all posts

Wednesday 26 September 2012

Uncle Chua's Buy and Hold Portfolio Performance Update

I have written about Uncle Chua's story and how he accumulated a great deal of wealth through his stock investment in Singapore.  The portfolio of stocks that he left in his will was mentioned in a book.

Here is Uncle Chua's portfolio & dividend income, reproduced here as accurately as was depicted in the book:
Uncle Chua's portfolio 2001
http://spreadsheets.google.com/pub?key=r5DhwS2nWTiIAK0pDCIPD-Q

All the shares he dealt in were ALL blue chip stocks.

I thought it would be interesting to see how his portfolio of stocks might have performed up to today, assuming the portfolio was left unmanaged, essentially a buy and hold strategy.

It was difficult to determine the initial prices of some of the stocks in the year 2001 and I have used the earliest available stock prices, from the Yahoo Finance website, to represent these initial prices of the stocks in 2001.  Some initial prices were left blank as I could not get any information on these.

Well, let's have a look at his updated portfolio.

Click here:
Uncle Chua's Updated portfolio 2012
https://docs.google.com/spreadsheet/ccc?key=0AuRRzs61sKqRdG43MlFBeWVDWVVpaDFBeHZxY181U1E

Uncle Chua's portfolio (Update)
Performance (not including dividends)
From 2001 to 2012
Period of 11 years  Thumbs Up Gain %
215.6%
Thumbs Up CAGR
11.0%



What conclusions can we derive from Uncle Chua's updated portfolio?

The portfolio has done quite well, returning a CAGR in share appreciation of  11.0%.  With dividends added, its performance has certainly outperformed the general market.  Do you agree?

The buy and hold strategy for this portfolio can be adopted by the defensive investors in their investing.

There are great lessons one can derive from Uncle Chua's legacy even today.

Conclusion:   Buy and hold is a safe and rewarding strategy for highly selected stocks.  



Related:

Uncle Chua's Portfolio & Dividend Income


http://myinvestingnotes.blogspot.com/2009/05/uncle-chuas-portfolio-dividend-income.html


The story of Uncle Chua


http://myinvestingnotes.blogspot.com/2009/05/story-of-uncle-chua.html


Appendix:   Rule Of Five 

The Rule of Five is BetterInvesting's method of letting you know you're not perfect and neither are your stock selections.

It states "For every five stocks you select using BetterInvesting methods, one will do much better than you expected, three will do about as well as you expected, and one will do much worse than you expected." 



The Rule of Five forms the basis for the first step of portfolio management, defense.

Here are the three possible outcomes for a stock's fundamentals on the SSG.



Defensive portfolio management's ONLY concern is finding stocks whose FUNDAMENTALS of SALES, PRE-TAX PROFITS, EPS, & PRE-TAX PROFIT MARGIN are not meeting your projections for future quality.

Click here  for a more indepth discussion of defensive portfolio management or click here   to see how the PERT Report is used to implement defensive portfolio management.

Monday 18 June 2012

The Impact of Reinvesting Dividends


The chart shows the value over time of a $100 investment made in the S&P 500 in 1925 with dividends reinvested vs. dividends not reinvested.  It appears in the book pretty much as shown below.

Dividends reinvested vs. not reinvested

It makes the difference between reinvesting dividends (the top line) and not reinvesting dividends (the bottom line) look pretty impresive, but it also makes it look like there isn't much difference until 50 years or so after the initial investment.  That's because the vertical scale is linear.

A more typical way to show compound growth such as this would be to use a semi-log chart, as shown next.  (A somewhat less serious problem with the chart above is that the horizontal scale distorts the amount of time at the beginning and end of the data.)

Dividends reinvested vs. dividends not reinvested (log scale)

  1. All that's really going on here is the difference between about 10.5% compound annualized growth (dividends reinvested, on the top line) and 5.7% compound annualized growth (dividends not reinvested, on the bottom line). 
  2.  
  3. The semi-log chart (with time properly represented on the horizontal scale) makes it clear that there is constant percentage growth in the value of the investment regardless of whether or not dividends are reinvested.  That's because the lines are straight (remember that straight lines on the semi-log chart indicate consistent compound growth).         
  4. It also shows more clearly that reinvestment of dividends 
  • affects the investment value right from the beginning and
    •  
  • provides a consistently increasing benefit as more and more time passes.

Thursday 15 December 2011

Given Anne's performance, it is not unreasonable to think that 25-year-olds with $5,000 today who follow her example could amass a multimillion-dollar portfolio by age 65.


HOW SHE TURNED $5,000 INTO $22 MILLION (AND HOW YOU MIGHT TOO...)
By FRANK LALLI

(MONEY Magazine) – In the depths of the depression, when she was already 38 years old and earning only a little more than $3,000 a year, Anne Scheiber invested a major portion of her life savings in stocks. She entrusted the money to the youngest of her four brothers, Bernard, who was getting started at 22 as a Wall Street broker. He did well picking issues for her as the market drifted upward in 1933 and '34. But his firm did not. It went bust suddenly, and Anne lost all her money.

"She was bitter with my father for the rest of her life," recalls Bernard's son Laurence, 41, a New York financial services salesman. "In fact, she got more bitter the older and richer she got."

Some of her anger at her broker brother seems understandable. After all, she had accumulated the money penny by penny for years by skipping meals, wearing clothes until they frayed and even walking to work in the rain to save bus fare. You might expect her to have turned against the very idea of investing as well. But not Anne; not for a minute. She rededicated herself to her saving and investing regimen with such a vengeance that it consumed her life--while also rewarding her with astonishing wealth. Although she never married, never even had a sweetheart, she did have one love: investing.

In 1944, 10 years after her big loss, she started fresh with a $5,000 account at Merrill Lynch Pierce Fenner & Beane and slowly built the nest egg up to $20 million by the time she died last January, loveless and alone at 101. It's now worth $22 million.

Few investors, including the best-known professionals of our age, have matched her record. Her return works out to 22.1% a year, above the performance of Vanguard's venerable John Neff (13.9%), better than pioneering securities analyst Benjamin Graham (17.4%), and just below Warren Buffett (22.7%) and Fidelity Magellan's Peter Lynch (29.2%). What's more, Anne's basic time-tested investing style can easily be adopted by any small investor. It relies on dedication more than dazzling financial analysis, faith in major companies more than a flair for prescient stock picking, and patience more than the pursuit of immediate profits.

Given Anne's performance, it is not unreasonable to think that 25-year-olds with $5,000 today who follow her example could amass a multimillion-dollar portfolio by age 65. Then they could live the rest of their lives, just as Anne did, with all the money they would ever need, plus the comfort of knowing they could eventually pass on their millions as they saw fit. In Anne's case, since she was estranged from her family, her 1975 will left only $50,000 to one of her nine relatives, a niece who looked in on her from time to time. Virtually her entire $22 million went to New York City's Yeshiva University, though she never visited the school. She specifically earmarked the money to help educate the bright and needy young women among the co-ed school's 6,200 students--women not unlike herself back around World War I.

"Anne was brilliant but weird about money," says her longtime New York City attorney Ben Clark. Relatives add that her fixation ran in the family. "The Scheibers were all like that," says Laurence. No matter how much they had, they feared they would lose it all, perhaps with some justification; it happened to the family twice.

"Back in Poland around the first World War," recalls Laurence's mother Lillian, "the Scheibers had gold buried in the ground. But they traded it for paper money that became worthless." Then in this country, Anne's father suffered substantial real estate losses before dying young and forcing her mother to go to work managing property to support her nine children.

For Anne at least, the money anxiety that darkened her early years was deepened by the family's European values. Whatever money the family did get went to educate the four sons; the five daughters were on their own. Anne persevered, however. She went to work as a bookkeeper at 15 and used her wages to better herself, eventually putting herself through school at night at the predecessor of George Washington University Law School in Washington, D.C. She joined the Internal Revenue Service as an auditor in 1920 and passed the bar exam in 1926 at age 32.

Years later Anne would often dwell on the two lessons she learned during her 23 years at the IRS. First, she concluded that--back then at least--women, especially Jewish women, had little chance of getting ahead. Attorney Clark, who has reviewed her agency records, says she was consistently one of the top auditors. Although she was barely five feet tall and 100 pounds, her favorite ploy was to march in and announce: "Obviously, these books aren't the correct ones. When I come back tomorrow, show me the real books." Then she would walk out. "She was a terror," says Clark. Nonetheless, she was never promoted. When she retired in 1943, she was making just $3,150.

The second lesson she learned poring over other people's tax returns was that the surest way to get rich in America was to invest in stocks. She ultimately concluded that she couldn't do much to change other people's prejudices, but she could do a lot to take care of herself.

Anne began saving money with a fervor that bordered on the maniacal. "She was saving 80% of her salary, at least," says Clark. "For example, she didn't spend $2 on food a week. In those days you could get a hot dog lunch at Nedick's for 15¢, but I know she found an even cheaper place."

"I don't think she was spending more than $2 on food in 1985 either," says her Merrill Lynch broker of 22 years, William Fay. "She'd wear the same black coat and black hat every day winter and summer. Once one of her nieces bought her a new black coat. But Anne found out it cost $150 and refused to wear it."

Anne plowed every dime into the market. Relying on her own methodical research and Merrill's analyst reports, she steadily nibbled at the leading brand-name companies in a few businesses she felt she understood, including drugs, beverages and entertainment. "She rarely bought more than 100 shares at a time," says Fay, "and only once bought more than 200. That's when she purchased 1,000 shares of Schering-Plough in the early '50s for $10,000." Today, her Schering-Plough alone is worth about $3.8 million.

She also almost never sold anything, even stocks that went underwater for years--partly because she hated paying commissions. "She'd say to me: 'Why should I fatten up the brokers? I'm just going to buy and hold,'" Clark recalls. Her buy-and-hold strategy often produced bonanzas. "Some of her stocks, especially in entertainment, got acquired for premiums three or four times, like Capital Cities Broadcasting, which became Cap Cities--Disney," says Fay.

By the early 1980s, as she approached 90, Anne found herself facing ever-steeper income taxes on her $10 million portfolio of about 100 stocks. That annoyed her no end. At Fay's urging, she decided to shift the $40,000 in dividends she collected each month into tax-exempt bonds and notes, some paying more than 8% completely tax-free. "She never sold a stock to go into bonds," says Fay. Still, within a few years, her cash flow climbed from $500,000 a year to around $750,000, while her tax bill remained in check.

Anne bought her last two stocks in 1985, 100 shares each of Apple and MCI. "She didn't trust technology, because she didn't understand it. So she resisted investing in it," says Fay. "Also, by then she didn't want to be bothered remembering the names of new stocks."

"What she'd say over and over again was: 'Don't ever tell anyone in my family how much money I have. I'm going to leave it all to education,'" recalls Fay. "And, of course, she did."

What are the lessons of Anne Scheiber's story? Here are eight investing tips--plus two concluding thoughts.

1. Invest in leading brands. Anne called them franchise names, by which she meant leading companies that created products she admired. For example, she owned Bristol-Myers, Allied Chemical and Coca-Cola. She also followed her instincts on untested companies. "When Pepsi-Cola came along, she tried it," says Fay, "and then bought PepsiCo when it was the new kid on the block."

2. Favor firms with growing earnings. Anne tended to ignore a stock's price-to-earnings ratio. Instead, she focused on the company's ability to increase profits. She reasoned that stocks are overpriced sometimes and underpriced others but it all works out in the end if the company's income rises year after year.

3. Capitalize on your interests. Anne always enjoyed movies. So she turned that pleasure into one of her investing themes by devouring Variety in search of the best entertainment companies. She scored big with Columbia, Paramount and Loews, as well as Capital Cities Broadcasting.

4. Invest in small bites. In addition to adding diversity to her portfolio, that rule automatically caused her to pick up extra shares when prices were low and avoid going overboard when prices were high.

5. Reinvest your dividends. It's the same principle as playing with the house's money in gambling, with this advantage--it's a sure moneymaker in long-term investing

6. Never sell. Or at least, never sell a stock you believe in. "For a long time in the rotten bear market of the '70s, many of her drug stocks were down, some by as much as 50%" says Fay. "But she hung on because she believed in them. She didn't panic in the crash of '87 either. She thought the general market had gotten overpriced, plus she was convinced her stocks would come back."

7. Keep informed. Anne went to all of her companies' New York City shareholder meetings. Rain, sleet or shine, she would walk over from her rent-stabilized, $450-a-month studio apartment in her trademark black coat and hat, buttonhole the CEO and demand answers, just as she did when she was an auditor. Then she would compare her notes with what the Merrill analysts were saying. Fay adds, however, that she also attended the meetings for the freebies. "Even when she had millions, she'd show up with a bag," confirms a relative. "If there was food served, she'd fill the bag and live on it for days."

8. Save with tax-exempt bonds. They provided more safety than stocks and cut her tax bill. When she died, she had 60% in stocks, 30% in bonds and 10% in cash.

In addition to those investing ideas, Anne's life also illustrates two other lessons worth considering, especially if you hope to end up with more than enough money as she did:

9. Give something back. Her $22 million gift to Yeshiva, plus an extra $100,000 she gave to an Israeli educational group, will help countless young women realize their full potential for years to come. Yeshiva's president Norman Lamm says: "Anne Scheiber lived to be 101 years old, but here at Yeshiva University her vision and legacy will live forever." One of her relatives who wasn't left a cent, New York City bank officer Dolly Acheson, adds that the Yeshiva gift gave her a "feeling of redemption." As she puts it: "At least in the end all that money went to a very good cause."

10. And finally, enjoy your money. As intelligent as Anne Scheiber was, she failed miserably on this one. She died without one real friend; she didn't get even one phone call during her last five years of life. Says her former broker Fay: "At some level, a recluse like her must get some psychic reward to keep going on that way. But to you and me, her life was terrible. A big day for her was walking down to the Merrill Lynch vault near Wall Street to visit her stock certificates. She did that a lot."

http://money.cnn.com/magazines/moneymag/moneymag_archive/1996/01/01/207651/index.htm

Tuesday 29 March 2011

Valuing A Stock With Supernormal Dividend Growth Rates


Valuing A Stock With Supernormal Dividend Growth Rates

by Peter Cherewyk
The supernormal growth model is most commonly seen in finance classes or more advanced investing certificate exams. It is based on discounting cash flows, and the purpose of the supernormal growth model is to value a stock which is expected to have higher than normal growth in dividend payments for some period in the future. After this supernormal growth the dividend is expected to go back to a normal with a constant growth. (For a background reading, check out Digging Into The Dividend Discount Model.)

Tutorial
Discounted Cash Flow Analysis
To understand the supernormal growth model we will go through three steps.
1. Dividend discount model (no growth in dividend payments)
2. Dividend growth model with constant growth (Gordon Growth Model)
3. Dividend discount model with supernormal growth
Dividend Discount Model (No Growth in Dividend Payments)
Preferred equity will usually pay the stockholder a fixed dividend, unlike common shares. If you take this payment and find the present value of the perpetuity you will find the implied value of the stock.
For example, if ABC Company is set to pay a $1.45 dividend next period and the required rate of return is 9%, then the expected value of the stock using this method would be 1.45/0.09 = $16.11. Every dividend payment in the future was discounted back to the present and added together.
V = D1/(1+k) + D2/(1+k)2 + D3/(1+k)3 + ... + Dn/(1+k)n 

Where:
V = the value
D1 = the dividend next period
k = the required rate of return
For example:
 V = $1.45/(1.09) + $1.45/(1.09)2 + $1.45/(1.09)3 + … + $1.45/(1.09)n
V= $1.33 + 1.22 + 1.12 + . . .
V= $16.11
Because every dividend is the same we can reduce this equation down to: V= D/k
V=$1.45/0.09
V=$16.11
With common shares you will not have the predictability in the dividend distribution. To find the value of a common share, take the dividends you expect to receive during your holding period and discount it back to the present period. But there is one additional calculation: when you sell the common shares you will have a lump sum in the future which will have to be discounted back as well. We will use "P" to represent the future price of the shares when you sell them. Take this expected price (P) of the stock at the end of the holding period and discount it back at the discount rate. You can already see that there are more assumptions you need to make which increases the odds of miscalculating. (Explore arguments for and against company dividend policy, and learn how companies determine how much to pay out, read How And Why Do Companies Pay Dividends?)
For example, if you were thinking about holding a stock for three years and expected the price to be $35 after the third year,  the expected dividend is $1.45 per year.
V= D1/(1+k) + D2/(1+k)2  + D3/(1+k)3 + P/(1+k)3
V = $1.45/1.09 + $1.45/1.092 + $1.45/1.093 +$35/1.093
Dividend Growth Model with Constant Growth (Gordon Growth Model)
Next let's assume there is a constant growth in the dividend. This would be best suited for evaluating larger stable dividend paying stocks. Look to the history of consistent dividend payments and predict the growth rate given the economy the industry and the company's policy on retained earnings.
Again we base the value on the present value of future cash flows:
V = D1/(1+k) + D2/(1+k)2+…..+Dn/(1+k)n
But we add a growth rate to each of the dividends (D1, D2, D3, etc.) In this example we will assume a 3% growth rate.
So D1 would be $1.45(1.03) = $1.49
D2 = $1.45(1.03)= $1.54
D3 = $1.45(1.03)3 = $1.58
This changes our original equation to : 
V = D1(1.03)/(1+k) + D2(1.03)2/(1+k)2+…..+Dn(1.03)n/(1+k)n
V = $1.45(1.03)/(1.09) + $1.45(1.03)2/(1.09)2 + $1.45(1.03)3/(1.09)3 + … + $1.45(1.03)n/(1.09)n
V = $1.37 +$1.29 + $1.22 + ….
V = 24.89
This reduces down to: V = D1/k-g
Dividend Discount Model with Supernormal Growth
Now that we know how to calculate the value of a stock with a constantly growing dividend we can move on to a supernormal growth dividend.
One way to think about the dividend payments is in two parts (A and B). Part A has a higher growth dividend; Part B has a constant growth dividend. (For more, see How Dividends Work For Investors.)
A) Higher Growth
This part is pretty straight forward - calculate each dividend amount at the higher growth rate and discount it back to the present period. This takes care of the supernormal growth period; all that is left is the value of the dividend payments which will grow at a continuous rate.
B) Regular Growth
Still working with the last period of higher growth, calculate the value of the remaining dividends using the V = D1/(k-g) equation from the previous section. But D1 in this case would be next year's dividend, expected to be growing at the constant rate. Now discount back to the present value through four periods. A common mistake is discounting back five periods instead of four. But we use the fourth period because the valuation of the perpetuity of dividends is based on the end of year dividend in period four, which takes into account dividends in year five and on.
The values of all discounted dividend payments are added up to get the net present value. For example if you have a stock which pays a $1.45 dividend which is expected to grow at 15% for three years then at a constant 6% into the future. The discount rate is 12%.
Steps
1. Find the four high growth dividends.
2. Find the value of the constant growth dividends from the fifth dividend onward.
3. Discount each value.
4. Add up the total amount.
Period
Dividend
Calculation
Amount
Present Value
1
D1
$1.45 x 1.151
$1.67
$1.50
2
D2
$1.45 x 1.152
$1.92
$1.56
3
D3
$1.45 x 1.153
$2.21
$1.61
4
D4
$1.45 x 1.154
$2.54
$1.67
5
D
$2.536 x 1.06
$2.69
$2.688 / (0.11 - 0.06)
$53.76
$53.76 / 1.114
$35.42
NPV
$41.76
Implementation
When doing a discount calculation you are usually attempting to estimate the value of the future payments. Then you can compare this calculated intrinsic value to the market price to see if the stock is over or undervalued compared to your calculations. In theory this technique would be used on growth companies expecting higher than normal growth, but the assumptions and expectations are hard to predict. Companies could not maintain a high growth rate over long periods of time. In a competitive market new entrants and alternatives will compete for the same returns thus bringing return on equity (ROE) down.
The Bottom LineCalculations using the supernormal growth model are difficult because of the assumptions involved such as the required rate or return, growth or length of higher returns. If this is off, it could drastically change the value of the shares. In most cases, such as tests or homework, these numbers will be given, but in the real world we are left to calculate and estimate each of the metrics and evaluate the current asking price for shares. Supernormal growth is based on a simple idea but can even give veteran investors trouble. (For more, check out Taking Stock Of Discounted Cash Flow.)

by Peter Cherewyk

Peter Cherewyk has worked in the financial field for over 10 years. He completed his Bachelor of Commerce from the University of Alberta, and is currently working towards a Chartered Financial Analyst designation. He enjoys hockey and hiking and the opportunity to teach others.


http://www.investopedia.com/articles/fundamental-analysis/11/supernormal-growth-analysis.asp

Tuesday 16 March 2010

Through Understanding the Power of Compounding, ANYONE can become rich if they start an investment plan EARLY in life.

It is not so much the increase in future value (FV) over the early 10-year periods of the savings plan, but the increase over the final 10-year period that yields the big bucks.

For instance, if we reference the compounding at 10 percent, 


  • FV increased by $41,338 between years 10 and 20, 
  • while the increase between years 40 and 50 was $721,316.
Thereafter, if you start your investment plan at age 30 rather than 20, the $1,000 a year you spent before that rather than invested will have cost you $721,316.

The greatest deterrent to an investment plan is not so much the fortitude to put aside a small percentage of income, but the willpower not to steal from the fund until your regular employment income ceases. Anyone can become rich if they start an investment plan early in life.


http://myinvestingnotes.blogspot.com/2008/11/understanding-power-of-compounding.html




Slow and consistent accumulation through the power of compounding. 


Investing is not about making a quick kill, but slow and consistent accumulation through the power of compounding. 


Sometimes, exceptional results will occur through 

  • the catch-up process of buying underpriced stocks or 
  • excessive market pricing
but unless you really know what you are doing, never gamble on chasing quick returns by being enticed to buy on margin.

Most individuals trading in highly leveraged futures are eventually wiped out by their lack of staying power when exceptional price volatility extinguishes their small percentage of equity. 


  • Losing a bet in which you can be 100 percent right with your choice but 1 percent wrong with the timing doesn't seem very good odds. 
  • Making money is nice, but peace of mind is much more valuable.
http://myinvestingnotes.blogspot.com/2008/11/slow-consistent-accumulation-through.html


Also read:
1.  Uncle Chua's Portfolio & Dividend Income
Here is Uncle Chua's portfolio & dividend income, reproduced here as accurately as was depicted in the book:  http://spreadsheets.google.com/pub?key=r5DhwS2nWTiIAK0pDCIPD-Q

2.  The Story of Anne Scheiber
http://www.horizon.my/2008/11/the-story-of-anne-scheiber/
Maxwell recounts the story of Anne Scheiber, an elderly and thrifty lady who lived in New York and worked for the Inland Revenue Service. When Scheiber retired at age fifty-one, she was only making $3,150 a year. She was treated poorly by her employer and was never promoted. Yet when Anne Scheiber died in 1995 at the age of 101, it was discovered that she left an estate to Yeshiva University worth US$22 million!
How did a public service worker with minimal salary accumulate such a staggering wealth?



3.  *****Long term investing based on Buy and Hold works for Selected Stocks
It sure beats FD rates and it is safe too.
http://spreadsheets.google.com/pub?key=tWENexpUrXS_RMxB7k73RgQ&output=html



The important lesson here is to realize the power of regular investment and compound returns. When you invest in good things and you invest regularly, your wealth will eventually multiply.

Thursday 14 May 2009

The story of Uncle Chua

How did Uncle Chua accumulate so much wealth in his portfolio?

Uncle Chua's Portfolio & Dividend Income
Here is Uncle Chua's portfolio & dividend income, reproduced here as accurately as was depicted in the book:
Uncle Chua's portfolio
http://spreadsheets.google.com/pub?key=r5DhwS2nWTiIAK0pDCIPD-Q

All the shares he dealt in were ALL blue chip stocks.

In mid-1997, when the Asian Financial Crisis started sweeping across regional markets, Uncle Chua didn't sell a single share. Instead, he started buying shares - again ALL blue chips and ONLY blue chips. He bought bit by bit as the STI index broke one low after another. This was unlike others who began panicking and dumping their shares to preserve what they had left.

Pretty soon, the index was somewhere in the 800-plus region, almost the lowest level then. But many were still convinced that the market could fall further. After all, there was blood on the streets and panic and pessimism everywhere. All news that was coming out was never assuring and very demoralizing.

Uncle Chua's gutsiness and calmness in such a chaotic situation was very puzzling.

However, Uncle Chua's portfolio statement comprised stocks of astronomical value. The most unbelievable part was that his entire portfolio consisted of nothing else but blue chip stocks. There was not even a single junk stock in the list. How did he pick those stocks?

Uncle Chua explained: "I bought some of them as early as in the 60s. I was then in my 50s and retired. I reckoned that I needed to have some sort of passive income and so I made a simple comparison between bank fixed deposits and stock dividends. I decided that the latter offered a better return, and so based on this very simple reasoning, I looked through the Chinese newspapers to select and buy into companies which paid good dividends that would maintain my family."

"Of course, I also made sure that the management team of the companies I bought was committed and acted in favour of shareholder intersts. That's why I asked you today, to tell me what the management said in this annual report about its future palans to steer the company and how much dividends they are proposing this year."


"Those stocks that I have bought also often issued bonus shares. Some even did stock splits, and with the dividends accrued, I reinvested everything back into those stocks I owned. That's how my portfolio grew to this size, but it certainly took me many years..."

Uncle Chua was a rare example of a successful invetor whose winning strategy was simple, direct, clear-cut, straightforward and hassle-free.

Reference: Why am I always Lo$ing in the Stock Market? Publisher: Heritt & Company


Related readings:

Uncle Chua's Portfolio and Dividend Income
http://myinvestingnotes.blogspot.com/2009/05/uncle-chuas-portfolio-dividend-income.html

Investing Philosophy and Strategy:  Keep It Simple and Safe (KISS)
http://myinvestingnotes.blogspot.com/p/keep-investing-simple-and-safe-kiss.html

Best Way to Minimize Risk of Your Portfolio:  Asset Allocation
http://myinvestingnotes.blogspot.com/2011/01/asset-allocation-best-way-to-minimize.html

Sunday 3 May 2009

Uncle Chua's Portfolio & Dividend Income

Uncle Chua's Portfolio & Dividend Income

This is a true story told by the remisier in his book. The story of Uncle Chua, an elderly man, who was barely literate and knew nothing about market tantrums or even how to use the Teletext facility on his TV set to monitor his portfolio of stocks. He managed to accumulate an incredible wealth in excess of $17,000,000 (Seventeen million dollars) by investing in stocks and shares alone.

Here is Uncle Chua's portfolio & dividend income, reproduced here as accurately as was depicted in the book: http://spreadsheets.google.com/pub?key=r5DhwS2nWTiIAK0pDCIPD-Q

He made it all from the market with an initial capital of a couple of hundred thousand dollars that he saved from many years of running a business in the shipping industry that he started in his late 30s.

Was this a miracle, pure luck, a fairy tale or bullshit? Let's learn a few lessons from this story later.

Reference: Why am I always Lo$ing in the Stock Market? Publisher: Heritt & Company

Also read:
The story of Uncle Chua: How did Uncle Chua accumulate so much wealth in his portfolio?