Why I decided to Drastically Increase 60% of my Portfolio to be in Dividend Stocks?

This will define how you invest.

This is a self-reflection post. It is a summary of my learnings from the current market correction.

The recent stock market correction has gotten me to re-look at my investment strategy. For the longest time ever, I have been critical of Singapore stocks for their underperformance. Many investors complain about the underperformance of the SG market, compared to the US market. That being said, the SG market has its merits. There are some gems which can be found, we only need to dig deep.

Everyone has their own unique personality. Your investing personality determines the type of investor you are and how you should make your investments.

Understanding your personality is important in investing. If you’re someone who is fearless and enjoy riding rollercoasters, chances are you’re a more risk tolerant investor. If you’re someone who is more conservative, chances are you are a risk adverse investor.

What I Learned About My Investing Personality

I started out as a dividend investor about 5 years ago, then gradually transitioned to growth investing in 2019. It worked for 3 years, giving me consistent annual returns of above 20%. Just when I thought I found the “magic pill”, the market started crashing in 2022. Growth stocks were hit the hardest and naturally my portfolio was not spared. This led me to reassess my risk management and the balance between my dividend vs growth stocks.

In investing, it is crucial to have an open mind. The world is moving at lighting speed these days. Things can change at the snap of a finger, and we should be adaptable to these changes. Some examples are the introduction of concepts like the metaverse and crypto, ideas which did not exist in the past.

My game plan is to lower my exposure to growth stocks, to reallocate some capital to dividend stocks instead. This will help to smooth out the volatility of my portfolio, whilst collecting some dividends along the way.

My portfolio will be rebalanced to reflect my risk appetite. One thing I’ve learned is that you don’t need to get the highest investment returns. Your portfolio should be one that allows you to sleep well at night. With a shift towards dividends, I will not be so emotionally affected when the market tanks. People might call this is a boomer mindset but hey, you do you.

My target allocation will be as follows:

Dividend stocks - 60%

Growth stocks - 30%

Crypto - 10%

This allocation is not for everyone. You have to assess your own risk tolerance and decide what works best for you.

Takeaways

Investing is as much an art as it is science. Emotions play a major role in how well you do.

Bear markets are the best teachers, bull markets teach you nothing.

Here’s one guiding question that may help in your portfolio allocation:

• If the market drops 50%, will I become emotionally affected?

  • If your answer is yes, then perhaps lower your exposure to growth stocks to a level you are comfortable with.

  • If your answer is no, then your current portfolio is good to go!

P.S I will be revealing the EXACT criteria I use to find good dividend growth stocks in the coming articles, so stay tuned!