Dissecting my COL portfolio

My equities investment is earmarked for my two sons' college expenses. My children are 7 and 3 years old, so I have about 11 years to grow my equity portfolio to Php2,000,000-Php3,000,000, which is the estimated tuition fee for two students taking up a 4 year course in a private college or university by the time my children reach college-age.

Considering my timeline, I positioned myself to be more of an investor than a trader. But truth be told, I'm being too generous by talking about "positioning myself as an investor", because I literally have no choice but to be an investor. With my lack of knowledge of day trading and lack of inclination to study its intricacies, I have no business sticking my nose in it. Thus, stock investor it is!

My current equities portfolio is comprised of stocks from these companies:

Since I am an investor with a long timeframe, I thought it prudent to buy First Metro Equity Traded Fund . Being an index fund, you don't have to deal with the usual pesky questions like "What stocks do I buy?" or "When do I sell/buy?". I simply buy on schedule and buy more when the price dips.

My decision was validated when Rose Fausto, the FQ mom and my life peg, recommended equity index funds as the best investment for retirement or if you have a long timeframe.

Metrobank (MBT) is my sentimental pick because it has been with me practically since I started trading more than 10 years ago.

I saw it rise all the way to Php97.9/share* and then drop to the 30s during the start of the lockdown. I also sold some of my MBT shares at a 30% ++ profit when I needed to raise money for my husband's operation. MBT and I have sure had some memorable times together. 

I added Ayala Land's AREIT and DMCI Holdings, Inc. (DMC) to my portfolio during the lockdown. I started reading up on cash dividend stocks and wanted in on that steady cash flow action too. But the more I read about cash dividend stocks, the more I realized that it was more suitable for those who want a reliable source of passive income and not for those who are still building their wealth.

Apparently, companies that issue cash dividends have little room for growth or very little plans of expansion. Hence, the profits are passed on to their stockholders instead of invested back into the company for growth, leading to slow capital appreciation or increase in share price. (source)

Also, you'll need a significant amount invested to generate a substantial cash dividend. If you invest that money instead in growth stocks or index funds, you can potentially earn much more, even if you factor in the cash dividends.. 

For example, AREIT gives out cash dividends of more or less 4% a year, depending on your average price. If you invested Php1,000,000.00 in AREIT when it was first offered on August 13, 2020 at Php27/share, you would have bought 37,000 shares.** Your initial investment would have grown to Php1,084,000.00, since AREIT share price has increased to Php29.3 as of this writing. You'll then get to pocket about Php40,000.00 as cash dividend if you held on up to the ex-dividend dates. That's a total gain of Php128,000.00, in both cash and paper gains.

But if you invested the same amount in FMETF also on August 13, 2000, your Php1,000,000.00 would have bought 11,110 shares*** at Php90/share and would have increased to about Php1,208,768 as of this writing, since FMETF shares are now at Php108.8/share. This would have led to about a 20% increase in capital for the same period or Php208,768.00 in paper gains.

Of course, FMETF shares could have also gone the opposite and could have dropped 20%. That's just the nature of investing in the stock market. But if you have a long enough timeframe, invest consistently, and start pulling out and moving your investments to safer vehicles when you get closer to your investment target, then you should be safe.

Since the plan is to grow my stock portfolio to 2M-3M, I'm better off steering clear of cash divided stocks for now and focusing on index funds instead. I'll shift my portfolio more towards cash dividend stocks when I get nearer to retirement age.

The plan for now is to stop buying MBT since it comprises a hefty 46.68% of my portfolio. I want to bring it down to 25%-30%, so I'll buy more FMETF, and maybe some AREIT and DMC too when there are price dips. But the general plan in the meantime is to pour my monthly stocks budget of Php10,000.00 into FMETF. I don't see any major shakeup in my equities strategy in the near future, but if there is, I'll be sure to update you guys.

* It's possible that MBT even rose higher than Php97.9/share, but I only have a record of this price.

** Rounded off to the nearest hundred since AREIT boardlot is 100 shares.

*** Rounded off to the nearest tens since FMETF boardlot is 10 shares.

**** Historical price data from PSE Edge portal

**** Yields projected are gross of taxes and brokers commissions and fees, because I don't know how to compute for those.

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Triple P said…
Another "forced" investor here. Great reminder that I don't need a lot of cash dividend stocks since I am still young. Portfolio is looking good Miss Jill!
Jillsabs said…
Thank you Triple P! Averaging down during the lockdown has yielded results.

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