An Income Investor's Journey

I opened up my mailbox yesterday and was glad to received dividend from SIA Engineering Co Ltd. I have 1,000 shares with them and so my dividend income amounted to SGD85.00. I would have been very happy if not for the fact that there is still a few hundred dollars of paper loss in my portfolio. Since my purchase of SIA Engineering early this year, the price has been going south. I have to constantly tell myself that I am a dividend investor and my objective is to grow my dividend income.

My goal is to have enough passive dividend income to support my expenses and eventually serve as an income when I retire. I want to build a diversified portfolio that provides me with enough income to support my lifestyle. Despite knowing very well the real reason why I want to buy into certain company's shares, I still get affected when prices dropped. I have some rules which I adhere to and they help to calm myself down when stock market becomes very volatile.

1) Do not check my shares too frequently
I once bought Hock Lian Seng's shares and the prices didn't move as I expected them to. I was disappointed, thinking I must have made a wrong investment choice and thus decided not to log into my online trading account to monitor anymore. One day, I was bored and have nothing better to do, I logged into my account and saw that the share price has gone up by a dollar. I was over the moon when I see the paper gain! I then decided to cash out my profits. I remembered the dividend yield was impressive but at that moment, I forgot why I invested in the company in the first place. 

Checking prices daily when you are investing for a longer time horizon like three to five years is meaningless. Not only does it affect your emotion and mood, it will sometimes result in over-trading or selling out of fear when we mistaken the 'noise' for a sell signal.

2) Do not keep thinking about the price I paid
Like many investors out there, I also want to buy a share at a bargain, when it is below its fair value. After doing some homework, I may have a price range that serve as a good entry point. However, sometimes the prices continue to go South and that makes me feel terrible. What I have learned is to buy and forget. If the price is still attractive and I still have some capital to invest, then I just buy when it goes down to a certain level.

3) Do not just buy a share based on dividend yield
When I just started investing, I select shares based on dividend yield. However, some of these companies are smaller and less established as compared to the blue chip companies. They also have a higher risk of failing to perform or dissolution in difficult times. I think it is better to invest in companies that have been proven to provide good and consistent dividend than those that may give you a high dividend this year but subsequently struggling to do well.

Furthermore, I am looking at a longer time horizon like three years and above. I do not want to be worrying whether will the company still be around several years down the road.