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SRS Portfolio as at 31 Dec 2012 & Investment Strategy 2013

Portfolio


During the month of Dec, the portfolio received the following dividends:
UMS Holdings $100
SPH Holdings $170
Interest $2.35

The portfolio also receive capital gains from Keppel Corporation and UOB Ltd.

The value of Starfish SRS portfolio as of 31 Dec 2012 was $36,865 and the cash was $61,650.87 = $98,335.87

Invested Capital = $82,875. ROI as of 31 Dec 2012 = 1.19x

Subsequent to the year-end, the value of the portfolio including cash crossed the $100k mark for the first time.

Investment Strategy 2013

After giving it much thought, i think a long term strategy of investing in dividend paying stocks is a sound one. It is able to generate passive income and yet preserve the capital. Some of the heartache will be to sell Cache, Starhub and Suntec and perhaps not buying China Merchants. However, the ability to invest in promising stocks such as Ezra and Ezion which i have missed and mentioned in Oct last year is an important one and such potential capital gains may shorten the time to "retirement" in a significant way. As such the investment focus of Starfish SRS will still be long term dividend-paying stocks with some positions in promising growth stocks and opportunities big cap trades. There is quite a huge amount of capital to be deployed in 2013 and perhaps i will increase my exposure to each position i take from the usual $5k to $10k and may consider adding to my existing positions if the price is attractive.

Effect of Compounding

The argument for compounding effect is a strong one. Assume the capital i have invested grow at 6% per annum and i reinvest the dividends. The table will look somewhat like this:


As you can see, i am "close" to the value of $98,946 at the end of 2012 but i will need to increase that value to $117,633 by end of 2013 if my "projected growth rate" is assumed to be 6%.

The sensitivity table below shows you how the portfolio will grow at the different "growth rates" at the same invested capital of $312,375.


This is why if you can grow your portfolio by 8% over a period of 30 years, you will be able to retire comfortably due to the effect of compounding. The worst to happen perhaps is to open a SRS account but not utilize the cash in the account to invest.

Happy investing.

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