So, what is the stock idea that caused millions of people to lose their chance for 10+ years, 20+ years, or even a lifetime of passive income from stock investing? 


Here it is: 


You won’t enjoy high capital appreciation if you invest for dividend yields.


Today, many believe that dividend yield is too slow a way to get rich in stocks. It is much faster and more exciting if the investment is focused on capital growth. After all, a 5% dividend yield a year is nothing when compared to having 100+% in capital gains from a stock purchase. If you invest RM 10,000 to buy a stock, 


1. Earning RM 500 in dividends a year is considered slow. 


2. Reaping RM 10,000 in capital gains in a short time is considered fast. 


With this belief, many attempt to achieve capital gains via trading, gambling, or speculating stocks in the stock market and as a result, this belief has resulted in many people to be inefficient in their allocation of investment capital and worst still, being robbed of a possible lifestyle that is funded by multi years of passive income that is recurring, consistent, and ever-growing for a long time. 


If You Have Been Trading Stocks for 20+ Years … 

So, how well has it been for your portfolio over the last 20 years? Did it work? If it does, great! I’m sure that you are a multi-millionaire with millions of ringgit in your portfolio today.

But, what if you are not and after 20+ years of stock trading, you are still aiming to flip your money RM 5,000 each time in stocks. Well, what’s wrong with that? After all, I just want to make another RM 5,000 from my next stock trade. Here, I have three questions for you: 


1. Have you been able to achieve 100% in capital gains for your stock purchases consistently for the past 6 months? After all, you have 20+ years of experiences in doing so? 


2. If you couldn’t, can you at least guarantee yourself that you’ll not lose capital from your next 10 stock purchases? 



3. If you can achieve 100% in capital gains every single time and would not lose money from your next 10 stock purchases, why not increase the transaction for each share from RM 5,000 to RM 50,000, RM 100,000 or RM 500,000? After all, if you spend RM 500,000 to buy a stock that could double your money without risk of losing money, you are guaranteed RM 500,000 in capital gain. Isn’t this a lot more exciting than just earning RM 5,000 in capital gain? 


Are You Challenging Me? 

More accurately, I would say I’m not challenging you, but your opinion on what is a better method of making money in the stock market. It’s not an ego debate but an intellectual one. 


I like to point out that if you have been trying stock trading, gambling, and even speculating for 20+ years and failed to build a million-dollar stock portfolio, you should rethink your beliefs, methods and strategies on making money in stocks. Pardon me. This opinion of yours could possibly have cost you as much as 20 or 30 years of passive income that you could enjoy from your stock portfolio. 


But, more importantly, I’m actually addressing the younger crowd today. 


If you are below 30 years old, would you like to be robbed away from 20+ years of dividend income from holding onto the idea that ‘you can’t be wealthy if you invest in dividend-yielding stocks’? Would you like to be the uncle or aunty that is still trying to flip their money in the stock market some 20+ years from now? 



Okay Young Man, Where’s Your Track Record? 

First, I’m a dividend investor. My objective is to earn dividend income from high quality dividend-paying stocks, not exactly capital appreciation which to me, it’s a bonus if I have any (which I have and I’ll explain why the stocks I bought in my portfolio can achieve sustainable capital appreciation later). 


I will not promise 100% capital gains from my stock investments for stock prices would move up and down every single day as long as the stock market opens. 


Instead, I can say that 100% of my stocks pay me dividends 3 or 6 months once. They are consistent in their capabilities in generating profits and cash flows and thus, are consistent in their dividend payouts. Overall, the dividend yield for my stocks in my portfolio is around 4.5%-8.0% per annum. 



How the Inexperienced Can Make Money in the Stock Market? 

But really …


I may not have 20+ years of experiences like what you have. 


What I have is a different belief about what stock investing is, how best to build wealth sustainably from it, and a workable investment model that can be easily applied by most people if they are willing to stick to it. I’m not smart enough to develop this system. But, I just know enough to ‘copy & paste’ something which is already working for Warren Buffett and Charlie Munger. 


Why not just follow the recipe book and start making money for yourself?


I’m not that smart, to be honest. 


If you ask me, ‘What stocks or sectors to buy during COVID-19?’, I won’t know. I am no prophet in the stock market and I couldn’t tell you or predict what could or might happen to the stock market over the next 6 months. I don’t know. You can watch CNBC or Bloomberg to find out for maybe, they would know better. 


But, it’s okay. To me, market prediction is not that important to build wealth in the stock market. Otherwise, all of the CNBC reporters, journalists and all these people who can predict markets are multi-millionaires by now. 


Thus, if you are new to the stock market and wish to build a profitable portfolio right from the start, what is the recommended way? 


Answer: Copy & Paste from someone who can build wealth sustainably from it. 



Why Dividend Investors Can Achieve Better Capital Appreciation? 

and they can do this consistently, sustainably, and a lot better than people who intend to achieve capital gains from their stock purchases in the first place. 


This means, for investors who invest RM 10,000 in a stock,  



1. Earning RM 500 in dividends a year is considered fast. 


2. Trying to reap RM 10,000 in capital gains in a short time is considered slow. 



Why? Here, I’ll list down three key reasons: 



1. Investors like myself wish to collect incremental dividend income every single year from a stock investment. To do so, we need to make sure that the dividend income is steady and rising year after year. This is assessed by checking its track record for growing its revenue, earnings, cash flow and dividends every year for the last 10 years. So, the fundamental quality of our stocks chosen is superior. 



2. Because of Reason 1, it attracts like-minded investors who intend to collect a string of passive income from their stock investments in the long-term. This will include pension funds like EPF & CPF, sovereign wealth funds like Temasek, unit trust funds, life & general insurers, billionaires, multi-millionaires, and investors who are long-term in nature. They have larger capital to invest and thus, driving up stock prices of these dividend-paying stocks sustainably for the long-term. 



3. In order to achieve high dividend yields, investors calculate dividend yields of a stock before investing. This means a stock must be low in trading price before it is deemed to be attractive for investment. In other words, dividend investors have been trained to buy low and not chase for quick gains like how most stock traders and gamblers chase for rubber glove stocks during COVID-19. 



In summary, we made better capital gains because our stocks’ fundamentals are much better, they are demanded by more investors with larger capital, and we are always trying to get better dividend yields by buying them at low prices. 



Will You Start to Earn Passive Income Today for the Next 20+ Years? 

I believe it is possible for all to start earning passive income this year and enjoy it for many years to come via savvy stock investing. 


It is easier if you are new to stock investing because you do not need to unlearn and reprogram your mindset from believing that stocks are just ‘lottery tickets’ to making quick money to knowing that stock investing is about accumulation of good businesses at low prices that bring you passive income for a lifetime. 


To Learn More: 


Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with Co-Founded, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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