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3 Key Investment Lessons Learned in 2021

It’s the end of year 2021 and I want to use this platform to reflect on my investment portfolio so far. I have 2 investment portfolios. One is for US market and another is for Malaysia market. Both of these portfolios are relatively new. I started it in early 2020 before the pandemic happened. My capital was split 80:20 respectively.

For US market, I trade options in addition to stock investing. While Malaysia market, I changed my strategy from purely growth-focused to dividend-growth investing. This is because I think that dividend-growth approach is the best for Malaysia market while growth investing is for US market.

Hence, the reason why I wrote a book about this dividend-growth investing approach recently. You can get a copy here if you’re interested to learn more.

In this journal, I want to pen down my key investment lessons learned this year from investing in both US and Malaysia market.

#1: IT’S ALL ABOUT BEING PATIENT

This year, KLSE Index’s performance has been down by -5.1%. We started the year 2021 with 1,627.21 points and ended this year with 1,543.61 points. While many countries’ stock market has been recovering, Malaysia is the exception. This is because we have many issues in our country and the biggest one is political stability issue.

KLCI Index 2021
Source: Shareinvestor.com

Nevertheless, my Malaysia portfolio ended this year with only +1.7% gain. Pretty stagnant if you ask me. But on the bright side, my dividend yield has increased to 2.7% from 1.3% as of December 2021. This is slightly higher than FD rate offered by banks in Malaysia currently. Overall, my gain is only 7.8% since inception in 2020.

MY Portfolio Performance 2021

I realized that stock investing is all about waiting patiently. Before you enter a position, you must wait for the stock to hit your target entry price. After you enter, you wait again for the stock to realize its value. The advantage of investing in dividend stocks is that you get paid for waiting.

#2: DON’T AIM FOR HOME RUN

Investing is not about finding that 1 stock that could go up 1,000% and make you rich overnight. It is all about managing a portfolio of stocks. If you’re trading options as well like me, then it is about managing your losses & maintain that profit consistency.

During the year 2021, I had several drawdowns in my US portfolio. The recent one is due to omicron concerns & it costs me about $5,000. Most of my option trades which previously making me money has turned negative.

This got me realized that I had many opportunities to take profit but I was aiming for home run. I ended up making lesser because of this. My most notable option trade was SPLK. It was making about $2,000 in profit at the time. I decided to hold it, thinking that it could go up higher.

Next day, news about the CEO resigns came in and the stock plunges 35%. I end up making only $200 in profit. What’s my lesson? Take profit when the chart shows signs of reversal pattern. Don’t aim for home run!

#3: TREND IS YOUR FRIEND

I guess many people have heard this phrase “trend is your friend”. This is true when I’m trading option. You should not go against the trend. If it is bearish, then your trades should be bearish trade rather than bullish ones. Unless of course, you have some money to lose then you bet on reversal.

Lately I realized that this phrase also holds true for long-term stock investing. In a cyclical market like Malaysia, you must be able to anticipate what the economic condition is like in 2 or 3 years’ time. By doing so, you then be able to know which industry to invest in.

A great example is glove industry. When pandemic hit, most of the existing glove companies are making a lot of money. Their stock prices when up to the moon. It is at this point that many companies like Mah Sing venture into gloves. While this happens in 2020, we should anticipate what’s going to happen to the gloves’ ASP and its competition next 2 to 3 years.

My thoughts during that time were the intensified competition. Not only local companies are venturing into gloves, globally as well. True enough, most of the glove stocks now starting to make lower profit.

Now, many of my stocks in Malaysia are recovery play. For example, retail-focused REITs. I anticipate that they will eventually return to pre-pandemic level as the economy recovers. They can’t stay low forever. I’ll be patiently waiting for the trend to be my friend again.

2022 OUTLOOK

All in all, my investments in 2021 have been doing pretty well especially for US. I’m up approximately 41% this year alone for US portfolio. Options trading has become my income generator. Out of the 12 months, only 3 months of losses so far. It’s been pretty consistent for me.

US Portfolio Performance 2021

Next year I guess the theme would be “inflation” and “interest rate hike”. In fact, inflation has already begun this year. But interest rate has not increase yet. That’s why I have loaded bank stock like Public Bank for my Malaysia portfolio.

Next year is also an election year for Malaysia. But this makes no difference to my portfolio. I will continue to invest in companies that has pricing power & pays dividend consistently.

If you would like to receive more how-to guide articles, do subscribe to this website. You can also check out some of my past articles on company’s key insights or browse through my independent analysis on REITs here.

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Thomas Chua

Founder of Stocks Insights. Prior to this, he was as an external auditor where he perform statutory audit on listed companies from various industries. He also involved in Enterprise Risk Management exercise and Internal Control Framework Review for entities undergoing IPO in Bursa Malaysia and SGX Catalyst Board. He is also a member of ACCA.

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