Random Thoughts – Travels, Current State of Stock Market, Dividend Investing
I’m currently on the longest work trip ever, a total of 16 days visiting 4 different countries. I was in Shenzhen China for a few days and now I’m in Hong Kong. I’ll be in Taipei later this week before making my way to Tokyo next Sunday. It’s tough to be away from home, especially when we have two little kids. I do feel that I’m missing out on the little ones’ developments. For example, just the other day when I was talking to Mrs. T on Skype, Baby T2.0 took her first steps!!!
Last time I was in Shenzhen was July 2016. When I arrived this time via the direct ferry from Hong Kong airport, I discovered there was a new ferry terminal. While on the taxi driving back and forth between hotel and office, I noticed even more constructions and new buildings than last time. I suppose all these developments have been driven by the booming high tech companies in Shenzhen.
I stayed at Shenzhen Marriott Hotel Nanshan like last time due to it being situated above a shopping mall called Coastal City. The hotel charged ~$100 CAD per person for dinner buffet, which I thought was absolutely ridiculous. I was a happy camper eating food that cost like $10-20 CAD. It didn’t make sense to me to spend that much money just because I was on a business trip.
I seemed to have gotten used to all the crazy driving in Shenzhen. I didn’t get fazed as much when tax drivers tried to turn left from the middle lane or cutting in and out of traffic. Weird.
While in Hong Kong, I managed to meet up with Jay from FI Fighter. Our schedule didn’t match up last July, so it was great to finally meet him in person this time.
Can you believe that we talked for like 4.5 hours on blogging, personal finance, FI, investing, real estate, traveling, and life? And we only parted ways because we had to catch the last train of the night. I am sure we could have talked for another couple of hours.
It was neat talking to Jay as he has already reached financial independence and living the nomadic lifestyle – the similar lifestyle that we are aiming to reach in about 9 years or so.
Funniest thing about meeting up with Jay? He asked me if I wanted to go to Hong Kong Disneyland on Monday because he was meeting up with a friend of his.
“Dude I’m here for work!”
“Oh yeah, I forgot!”
Although this is my 3rd time in Hong Kong, I have only seen very little of the city. The first time I literally saw my hotel room, the office, and Hong Kong airport. Last time I managed to see Victoria Harbour. So I decided that I would see more of Hong Kong this time.
On Sunday I went on a wild walking adventure. I walked as much as I could, wandered around, without knowing where I was going.
Many people recommended going up Victoria Peak with the peak tram. When I went there, the wait was 1.5 hours. I decided it wasn’t very time efficient to stand around like a dummie for 1.5 hours. Instead, I walked around Central, Hong Kong Park, and the surrounding area. It was interesting to see all these Indonesia & Philippine women sitting on the streets and elevated walkways with their friends and family, having a good time. Apparently Sunday was Maids Day Off in Hong Kong and they would gather around to enjoy time together (aka hygge).
Jay had told me that Mong Kok was super crowded. Originally I wasn’t planning to head there but changed my mind. Mong Kok was indeed very crowded but I thought there were lots of interesting things to see in the area. And I got to walk on the longest escalator walkways in Hong Kong. Neat!
One thing I wished I had? My Canon DSLR camera. There were so much great stuff in Hong Kong for street photography. A cellphone camera just wasn’t quite up to the job.
Thoughts on the Current State of Stock Market
During our lengthy discussions, both Jay and I agreed that stock evaluations are going through the roof. It’s harder and harder to find undervalued stocks. That’s why Jay shifted his focus from real estate and dividend stocks to mining stocks. For me, dividend growth investing will always be our core investment. But it doesn’t mean dividend stocks are the only investment that we own. Diversification is the key when it comes to investing. That’s why we have our house (real estate) and have been investing in non-dividend paying stocks. I just really don’t talk about it on this blog.
How come I don’t? To be honest, I don’t know. I just find it more interesting to write about dividend stocks. Perhaps readers will disagree?
With so many dividend stocks hovering at crazy high evaluation right now, does it make sense to sell now and buy back later? I have tried to answer this question many times in the last few months. Lately, it seemed that our investment portfolio value would reach an all-time-high whenever I checked. I’m still not convinced that liquidating everything is the right answer. However, after the recent crude oil crash and the slight recovery since, I have thought about reducing our exposure to oil producers.
Is that the right call?
I don’t have a crystal ball so I don’t know. However, looking at the bigger picture I think we will rely less and less on oil in the next 10+ years or so. The cost of clean energy is going down and soon we will reach the tipping point for clean energy sources like solar, wind, tidal, and geothermal to be main stream. We as humans need to utilize clean energy sources so we don’t destroy our beautiful planet.
Clean energy was the key reason for purchasing Brookfield Renewable Energy Partners Ltd (BEP.UN). Maybe we need to look beyond the clean energy stocks that pay dividend.
Don’t get me wrong, we are still very much focused on receiving over $15,000 in dividend income for 2017. But having this goal shouldn’t cause us to lose sight on our long term goal – to be financially independent. There are many ways to become financial independent, you can have a portfolio of over $1M and do the standard 4% withdrawals, you can have a dividend portfolio that covers your expenses, you can own multiple rental properties, you can own businesses, or you can collect royalties (I’m sure there are others that I haven’t covered here).
For us, to be financially independent means that our dividend income is greater or equal to our expenses. That’s the main goal but it doesn’t mean we can’t look at utilizing other sources. For example we have our cookbook business that will generate larger passive income in the future. The key is multiple passive income stream. Maybe we need to investigate other options.
More Thoughts on Dividend Investing
The way I see it, there are 3 ways to get our dividend income generating sufficient amount to cover our expenses:
- Invest large amount of capital each year to increase dividend income
- Keep expenses low
- Utilize the power of dividend organic growth and DRIP
I think Mrs. T and I have gotten #2 down pretty well, spending a total of $44,138.77 in 2016. #3 is somewhat outside of our control. The tricky one is #1. Having high savings rate helps but it would certainly help if there’s a way to put money on hyper-drive. or example, having $10,000 saved grow to $20,000 or more in a relatively short time. That money can then be used to invest in dividend stocks that have good evaluations or undervalued.
The key with dividend investing, I think, is to purchase something with good growth potential and evaluation. Buying something that’s overvalued will only hurt you in the long term. As I mentioned in How to start investing in Dividend Stocks, there are two ways to make money with stocks.
- Price appreciation. This is where your sale price is higher than the purchase price.
- Dividends. Regular cash payments from the company.
The two aren’t mutually exclusive. You can certainly make money by having price appreciation and receiving dividends.
Unfortunately, we dividend growth investors are often too focus on the dividend income amount and receiving more of it, that we fail to look at price appreciation. I truly believe that the two must go hand in hand. It’s better to have 3% dividend yield and 5% annual price appreciation than 3% dividend yield alone.
What drives price appreciation? Growth. If a stock has no growth, the price probably won’t go up.
Stock price goes bananas when there’s a positive difference between analysts’ and the Street’s estimated earning and the actual earning. Because dividend stocks are more mature stocks, this kind of positive differences are less common but definitely possible…
I’m by no means ditching dividend growth investing. What am I doing? I’m examining alternatives to diversify and possibly accelerate our path to FI.
My Best Advice
Don’t follow blindly. Just because I appear to have a blog, it doesn’t mean you should follow everything I write and say. I write about my personal opinions and views. Take my advice with a grain of salt and definitely question whatever I write and say. If we all just agree with each other all the time, we will never be able to learn anything. Learning comes from healthy discussions. Be open minded. Be willing to learn. Be willing to defend your beliefs but also be willing to defend against your beliefs
Don’t ever just follow the masses (sometimes the m is silent).
Think for yourself.
I’ll end this post with a quote and video from Tool. Enjoy!
Think for yourself
Throughout human history, as our species has faced the frightening,
terrorizing fact that we do not know who we are, or where we are going in
this ocean of chaos, it has been the authorities, the political, the
religious, the educational authorities who attempted to comfort us by
giving us order, rules, regulations, informing, forming in our minds their
view of reality. To think for yourself you must question authority and
learn how to put yourself in a state of vulnerable, open-mindedness;
chaotic, confused, vulnerability to inform yourself.
Think for yourself.