27 Jun 2017
Late last year, I met up with a new co-worker of mine.
He recognized me back in office, when he remembered seeing me at a recent Annual General Meeting (AGM) for a company that I invested in.
So we had a lunch date.
When I met him for lunch, I noticed he drives a big car, a vehicle that is more fitting for a director than your typical engineer. That puts a question in my head, whether an engineer can get rich working for a long time, or that being a stock investor is able to get us a nice life like that.
Always curious about another investor’s thought process, I asked him about his investment process.
And I came away not having a good idea about his investment process.
He shared with me that he was punting stocks for the longest time in a haphazard manner, until an old timer told him how important dividends are.
He works hard to understand the businesses, the opportunity that some stocks provides and size up the company by attending AGMs.
Yet in the countless of investing tales shared, it was littered with many stocks that I doubt I would consider them as dividend stocks, or that they were sold too fast, which feels to me like short term trades.
What pained me was the stories of the big losses he incurred for investing in some high dividend yielding companies, oil and gas companies.
If you make a 5% portfolio loss, you need 5.2% gain to make back your capital. If you make a 30% portfolio loss, you need 42.8% gain to make back your capital.
Having large draw-downs hurt, whether you invest for dividends or not.