21 July 2017

The Importance Of Rebalancing

Why is it important to rebalance your portfolio?

Assuming you bought your share at $1 which gave you 5% dividend yield. After few months, the stock went up to $2. 

What's your dividend yield now?

If you have followed through this blog, you would know that now the dividend yield becomes 2.5%. Simple math right?

So if you choose not to rebalance by selling partial or all of your shares, not only you wouldn't be able to grow your portfolio, you would only have paper gain of that $1 ($2-$1).

And certainly, market tends to be a "weighing machine" in the long run. Your $2 worth of shares might soon becomes $1.50 or even half of your initial purchased price, $0.50.

What should I do?

  • Rebalance it - You can choose to sell half or all of your shares at $2 and use the proceeds to buy another counter which gives you more than 5% dividend yields (Assuming your desire dividend yield is 5%)
  • Sell and wait - If there are no better opportunity, you can choose to sell at $2 (ultimately you already doubled your return, don't be greedy to wait till $3 or $4) and hold cash to wait for better opportunities.

13 July 2017

A Great Company Is An Asset!

what is an asset?

Truth about Asset vs Liability 

As most of you already knew the difference between an asset and a liability.

However, knowing and having a deep understanding can mean a different thing.

It is only through deep understanding then we will put our knowledge into action.

Personally, as I fractured my hand recently and couldn't produce active income for more than two weeks. I began to have a deep understanding of what's an asset really means and the more you have the easier your life will become.

Likewise for liabilities, the lesser you have the better it is.

Therefore, I would like to make sure you understand it as much as I do; that an asset put money into your pockets even if you don't work.

A liability take money away from your pockets even if you don't work!

Remember, the keywords here is even if you don't work!!!

We want to acquire as much asset and eliminate as much liability till the income from the assets are able to replace our expense.