Monday, November 21, 2011

STOCKPILING - the way to maximise growth in your savings.

Stockpiling, what exactly is that? Many billionaires stockpile their shareholdings to success.

You may want to click on the link to see how it is done.

Stockpiling is an Art which requires courage to do it.

In general, the steps of stockpiling are as follows:
1.  Choose a company that you are interested to invest in it.
2.  Read the company's past annual reports and the chairman's or CEO's outlook on future growth.
3.  Make some calculations, so that you can set a target BUY price of the shares.
4.  Strike whenever the share price hits your target buy price.
5.  Save more money, so that you can purchase more shares when there is opportunity to do so, ie. the share price has dropped to your target buy price again.
6.  Update your target buy price annually, or after every quarter after results announcement. As earnings increase, your target buy price should increase and vice versa.
7.  Have enough money in your warchest, so that you can strike whenever an opportunity arises.

Like I said, stockpiling requires courage. You must build this courage in the course of trading shares.

For the past one to two years, I have practiced stockpiling on Popular Holdings. Since two years ago, I have personal valuation of Popular Holdings and I have my personal target BUY price. Every time I received dividends from Popular, I will save them in my warchest, together with my savings for investments. In these two years, there were many opportunities that I have taken advantage of and stockpile my shareholdings. You would have guessed that I have struck during the Japan's earthquake, the US credit downgrading, the current Eurozone crisis, etc.
I am still working hard to achieve my target of owning 2 million Popular shares.

Why is stockpiling one of the better way to grow investment savings?
1.  You just need to concentrate and monitor one company.
2.  It allows you time to save and grow your warchest.
3.  You will not be buying over-priced shares as you already have a personal valuation of the company.
4.  You will earn more dividends in the future, with the increased number of shares.
5.  With the dividends, you will be able to buy more of the company's shares at your target BUY price.
6.  This process of getting more dividends to buy more shares, to receive more dividends, to get more shares goes on and on and on.
7.  There will come a day when you can just use the dividends received to purchase more shares.

The only bad thing about the stockpiling is when you are holding a large amount of the company's shares. It will be difficult to sell all at one go. However, if you know that this company is going to last for the next ten to twenty years and give you good dividends for that period, then the risk to invest is this company is reduced to the minimum.


Happy investing.

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