Investment Idea - May 2012

Greeting! We are now almost at the half of 2012! US stock market continue the up trend, the Dow Index back to 13,000 points again. However, it show slightly weaker over the last few week. When I review my record, in fact, 2007 Dow Index already break the 13,000, seem today it's back to square one! There's one popular quote, “sell in May and go away”, hence, be watch out for this month!

 

 

Build Investment Strategy - for Long Term Investor

If you don't have proper investment strategy, after few years, some may realize that their investment is back to square one. Some even make a negative return! The very first rules in any investment is protect your capital, once you know the way, making money is not a problem anymore.

Let me share my experience for Investment Strategy on Maybank.

1. Purpose – write down the purpose, for example, mine is to find the good company that consistently distribute the profit to share holders with at least 2 times better than FD and at the same time the company is growing.
2. Measure – now I know bank's FD rate is 3.5%, so 2 times mean 7%. When I screen through all the blue chips, Maybank is one of the best company to fit the purpose. With this way, we can know if the stock is under or over value. For instant, Maybank gave 60 cents of dividend, if current market price is RM8.60, then it's equal to DY of 6.97%. If Maybank at RM8.20, the DY is 7.31%, (very attractive price!)
3. Review – after measured, we can review or change the plan accordingly if require. For example, if the market price up till too high, or when the DY become very close to FD rate, then I may consider to sell some of the shares. Similarly, I will plan for buy order if the price become very attractive.
4. Weaknesses - we need to know, when economy look promising, bank's profit will double. However, if economy turn bad, it's profit will badly hit. That's why we need to look for something very big like Maybank in order to sail through the bad time.
5. Strength – Maybank having clear dividend policy of distribute 40 to 60% of profit as dividend. Also, it's one of the only 3 company in Malaysia that provide the Dividend Reinvestment plan, where share holders can opt to buy Maybank's share at 10% discount from the market price!