In a football game, we need a balanced team with 11 strong players (defenders, midfielders, strikers, goalkeeper), coach, opponent team, referee and audience. Each of them is playing a key role for a successful world cup, highest level of stock investing. Similar for stock investing, the highest level of investing is positioning during global stock crisis, let’s learn how to apply 3 main strategies of dream team.
Defender stocks usually are positioned for passive income (dividend) regardless rain or shine, suitable for all investing at all time but higher yield during crisis. Midfielder stocks usually aim for growth with capital gains and some bonus dividend. Striker stocks may have higher risks but potential return in shorter time is higher when one could take calculated risks.
Goalkeeper is the cash or capital available for stock investing, careful allocation is important. If a team is too defensive, all 11 players would shield around the goal pole (100% cash), then risk is zero but the potential return is also zero (this strategy is possible during high optimism market, take profits by selling stocks and stay risk free, eg over the last 2 years of high optimism market > 75%). In a low optimism market, goalkeeper could be more aggressive, even a goalkeeper may play the role as defender (0% cash, all invested) when opponent (stock market) is very weak (eg. 0% Optimism with global financial crisis).
Coach is in fact each of the investors who is like a fund manager, making the strategic moves for all 11 players, adjusting their roles (more aggressive, more defensive, balanced, 100% cash, etc) based on the condition of stock market (opponent team) which could be different at various timeframes (short term, mid term, long term).
Referee is the investing results, sometimes may declare win or lose, depending on the time of the game (eg. full game or extended investing game in day, week, month, year or never ending game of a lifetime). Some players who violate the rules of stock game (eg. insider trading or fake financial report) would get caught, may be given a yellow / red card or banned permanently from the investing game.
Audience are all the readers of investing article here, who may feel excited, worried, sad or no emotion when reading about stock market. After the exciting investing game is over, audience would be back to normal life, working for others to gain active income. If an audience (reader or learner) is motivated, also taking action (Buy, Hold, Sell, Wait, Shorting) in investing, then the effort of learning will be paid off. If an audience is still an audience (reading hundreds of posts or video daily) without action aligned with own personality, life still goes on, continue the same way. So, to have a positive change in life, one may need to start a positive action.
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So much about the football team, main goal is to motivate beginners to start investing, especially using time (compounding effect) with global stock crisis (buy low for global giant stocks) to change your current life.
There are 3 main strategies during global stock crisis (which falls about 30% over the last 1 month):
1) Dividend Giant Stocks (Defender)
This strategy is more suitable for contrarian investor (investing during bearish stock market, eg in current market). Main objective is to collect high dividend yield >5-10% (acceptable even if dividend is cut by 50%, eg for REITs, still much better than holding to cash with only 1% bank interest rate) through investing in strong fundamental businesses, supported by strong holding power of 1-3 years to face the uncertain crisis.
This method requires multiple entries (for every crisis, eg 10-20% lower prices each time, see my past articles for examples) to average down the price and diversify into 10-20 global giant stocks with at least 3 sectors from 3 countries. For 20 giant stocks (with min 5% dividend yield), assuming 1 giant stock may even go bankrupt (eg. DBS or OCBC, unlikely but assume it happens), this is max 5% permanent loss, which could be compensated easily by holding 1 year with 5% dividend yield.
For value investing, the “cost” of missing the opportunity boat may be higher than buying in falling price because of greedy to buy at the lowest price, eventually untrained investor may either need to pay higher price or totally miss again, buying at just fair price when marketing is recovering.
2) Growth Giant Stocks (Midfielder)
This strategy is more suitable for trend-following investor (possible for counter-trend investor but need to have min 2-3% dividend yield as mid-fielder). The high growth stocks are hard to get low optimism, this requires more patience, when opportunity comes, one may take action, despite the correction in global stock crisis may not be a lot (eg. 20-30%), unlike over 50% price correction in cyclic stocks, but these growth stocks are planned for buy low and hold long term for potential multi bagger (3X – 10X capital gains). Growth stocks investors have option not to sell during the next global financial crisis because the stocks are too good, will be the final 1% stocks to sell unless it is the end of the world (if so, stock market is no longer important to human, therefore no risk at all then).
3) Cyclic Giant stocks (Striker)
This strategy may be considered for shorter term trading or crisis investing (eg oil & gas stocks or crude oil itself, airlines stocks, F&B stocks, etc) with severe price correction during crisis, or for cyclical sectors such as bank, property and technology stocks which follows economic cycles (will fall badly during global economic crisis). Cyclic stocks do not need dividend, therefore risks are higher, more suitable for trend-following, wait for reversal in prices. For counter-trend investing, it is only possible if it is <10% of portfolio or 1 of multiple entries (easy new entry may wait for extra 20% dip before entering again). Crisis investing stocks would suffer real damage in business but should be at sector level, not only on individual stock.
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A smart investor who hopes to enter the bearish stock market right away with less risks through dividend stock, may also combine different Ein55 dividend stock investing strategies developed by Dr Tee, eg:
1) Growth Dividend Stocks
– collect dividend during low optimism, then enjoy capital gains when crisis is over.
2) Cyclic Dividend Stocks
– crisis giant stocks with great price correction and high dividend yield
3) Defensive Dividend stocks
– Dividend stocks with defensive business and stable stock prices
4) Undervalue Dividend Stocks
– dividend stocks with strong assets in property and cash but share price is less than 50% of value with regular dividend payment
5) Lifetime / Long Term Dividend Stocks
– Some may compromise dividend for higher and more stable growth, especially when planning for longer term investing or even lifetime investing (buy low and hold for life).
There are over 1500 global giant stocks, including 100 global dividend giant stocks based on Dr Tee criteria. An investor (coach) just needs to choose 10-20 of them to form a football team (own stock portfolio) to join the current world cup of stock crisis. Winner would gain the highest title of stock investing with potential high return. However, it requires practices and training to achieve this level, eg. playing in a state investing game first (minor stock correction) or country investing game (major stock correction).
Don’t continue to be an audience to cheer for your favourite team or do nothing throughout the game of investing. Instead, join the game as a coach now to form your own stock investing dream team, crisis is usually the best timing to recruit the best stock players who may be discounted by more than 50% in market prices.
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