Strategy Planning
Recently I reflected and ponder on my strategy towards achieving financial freedom. 2016 have been a good year for me thus far, making double digit returns on a couple of stocks. However, I started to stray from what I wanted to achieve, I lose sight of a specific strategy that I want to use.
I came up with this guideline after some serious reflection and I thought that it will be good to serve as a foundation for everyone. Firstly, I will anchor my investment decision based on 2 key factor.
1. Preserving Capital
2. Recurring Income
Preserving Capital is similar to Warren Buffet Rule No. 1, Never to lose money. In addition, I added the importance of having Recurring Income.
As you can see from the diagram above, most of us will rely on 1 source of active income which tends to be our job to build our portfolio. I decided to split my portfolio into 3 main category, Income Producing, STI ETF and Growth.
Income Producing Stock will provide me with regular dividends to reinvest into growing my portfolio. They can consist of Reits, High Dividend Paying Shares and Selling of Options.
STI ETF will serve as my backup plan should my other investment fails. (Do note that in the long run, STI ETF will generally be on the uptrend due to it being tagged very closely to Singapore’s economy).
Growth stock will be the portion whereby I will focus more on capital appreciation. This will be the pie that will grow my money substantially. This strategy might seem very simple but this is actually the foundation to all successful businesses.
First, they must have a strong back up reserve (Can be their cash or assets).
Secondly, they must have a recurring business model whereby they can focus on growing their company while having a stable flow of income coming in.
Thirdly, they will constantly look for new products or entering into new market to spur the growth of the company.
After realizing this, it doesn’t make sense for us not to manage our portfolio like what a good business will. Have you ever stopped and reflected upon your investing strategy?
I hope that my simple strategy will help aid in laying the foundation for your investment portfolio.
