I am a slow thinker. I need time to connect dots. I felt very compelled to write again. Invest X congress has provide the spark for me to reconnect the thoughts again.
I replied in a comment, that the level of enlightenment and excitement is no lower than the time I lay my hands in "the intelligent investor", a watershed moment in investing.
I have a few nagging questions that have been answered, and I wish to crystallize my thoughts before they are gone again.
Q1) how much to keep for war chest?
Q2) why it so darn hard for me to keep my hands off the market when I am sitting on cash?
Q3) what is my plan for multiple market cycles?
I have high expenses, I cannot just say cut then cut, I need to convince my wife and my in-laws that overseas trips are a waste of money. I am more or less resigned to the fact that I will work till I die.
I have a portfolio of 50k, including cash idling now. What to do with it?
To answer q2) the end goal is really important. I want 400k by 60, so that my passive income can be 2k per month. I know many of u have 400k now, and is already laughing. Is ok. I just want to lead my life my way. I know I can keep the 50K port active. It is a minimum port, if anytime I exited a counter and it fall below that level, and I find another value proposition, I can just go for it again, there is no need to wait for a correction. There is no need to worry about inflation, as the core of returns of 5-6% through dividends should allow compounding of reinvestment. When I see the end goal clearly, there is less urge to buy that counter that will be gone tomorrow. The decision of what and when to buy, how much to buy become clear. It is so much easier to keep my hand off or on the market now, with the plan clear and sound in my head. The plan may works or not works, but without one, u don't even know it doesn't work
The most important criteria is dividends. Other things work too. But my core 50k should be all income generating, preferably between 4-6%. The next important criteria is it must withstand stress tests, balance sheet strength is a must! Ability to bounce back is a must too.
Will re look my counters again. I still believe in diversification. My circle of competence must be spent on preventing blown ups that have no chance of recovery.
Q1) how much to keep as warchest? As much as possible. Assume 6% return for 50k compounding, I just need to feed 3k plus for the next few years. These are the amount I can actively buy whenever I find value proposition that fit my criteria. The rest of the money will be tuck away as opportunity fund, and to strengthen emergency fund. When opp fund almost equal to port size, can consider increasing port size. Otherwise, the port size increase will come strictly from dividends. That would set my mind at peace with any emergency or market correction.
When market correct 5-15%, opp fund can be dipped into, but by no more than 30%.
When market correct 15% to 25% another 40% can be used.
If crash of beyond 30%, the reminder can be used.
How about super bear of more than 50%? I think it will be blood all over the street, CPF OA to pick blue chips should be fine.
Does aggressive growth counters has a place in my port?? Well, if opp fund is almost as big as port, I think some money for adventure is fine. But like what AK says, it is a small part.
Counters that give good dividends but not "AA" rated by my own benchmark should be constantly monitored and should not cover more than 10% of port.
Cigar puff counters, with viability of only 2-3 years should be traded off with good profits unless visibility improve.
Area of improvement:
1) bigger radar of companies
2) qualitative comparison of companies
I néed to have my circle of competence up and running soon.