3 Reasons Why Value Investing is So Powerful – Millionaire Investor
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3 Reasons Why Value Investing is So Powerful

3 Reasons Why Value Investing is So Powerful

1. High Dividend Income and Capital Gain.
Investing in great businesses at undervalued and fair value prices provides high dividend and capital gain.

Some has suggested that it is difficult to sustain a living based on dividends alone because you need a large amount of capital to invest. Their argument typically goes like this: “If you need $50,000 annually and your dividend yield is about 5%, then you’d need $1m in capital to invest.”

This is a very narrow and short-term view of looking at investing. My personal experience reveals a very different perspective. If you invest in a great business at a grossly undervalued price during a crisis, your dividend yield is going to grow tremendously over time.

For example:
in 2003, I purchased SGX (Singapore Stock Exchange) at about $1.60/share. I valued SGX at $4-$5 then. The dividend was only $0.05 per share, which meant the dividend yield was about 3%. Yes, a small yield but just nice enough to offset inflation.

SGX continued to grow and in early 2007, its stock price reached $7.50-$8. They also announced a dividend of $0.35/share. The dividend yield based on SGX’s 2007 price was 4.4%. Again, just nice to offset inflation, right?

But wait! At what price did I purchase SGX for in 2003? $1.60. $0.35/$1.60 = 22% dividend yield! I have not even factored in my capital gains. So what would happen when I reinvest my dividend income? I get even more dividends next year (which I continue to reinvest) and compounding return will work its wonder. Pretty soon, you can achieve more than 100% returns from just dividends alone.

Some of my recent dividend yields are between 10%-14.5% and they continue to grow. I know of investors who have a 40% dividend yield for certain stocks they own, which means they only took 2.5 years to breakeven on their initial capital!

2. Pure Passive Income
When I posted some of my dividend cheques online, someone private messaged me asking whether I am interested in other streams of passive income like MLM.

Let me be very clear — passive income to me means my one-time effort providing continuous income for years to come. I love value investing because there are no down-line recruitments, no meetings, no software, no active trading, no charts, no monitoring of stock screens.

I just stay at home and collect cheques from great companies while watching their value grow. MLM is not a passive income business, it merely provides a residual income stream. Trading is making a living. If you want to build wealth, invest. In you want to build wealth massively, value invest.

3. Tax Free or Only Tier 1 Tax Structure
In Singapore and Malaysia, both capital gains from stock/equity investing and dividends are tax free (especially for Real Estate Investment Trusts).

Investing in a great business at an undervalued price is like buying a golden goose that will lay golden eggs for you continuously over time. The question is whether you have the right investing knowledge, emotional stability and patience to let it grow :)Earning Disclaimer
“Please note that the material here is provided to you for general information and illustrative purposes only, or as descriptive case studies on how our value-investing principles may be applied. It is not intended to be and should not be construed as any form of general or specific financial advice. For the avoidance of doubt, we do not recommend or provide opinions on how or what you should or should not be investing in, and you should always do your own research and independent assessment before making any investment decisions, taking into account your own specific circumstances. If you require any financial advice on investments or any other financial matters, please consult the relevant professional financial advisers.”

About The Author

Ken Chee
Business & Investing Firebrand

An award-winning entrepreneur, author and savvy value investor, Ken Chee co-founded 8 Investment in 2008 during the Lehman Brothers crisis, with the purpose of creating sustainable value through investment, business & education. Driven with that in mind, Ken transformed 8 Investment from a private investment business with $0 start-up capital, into a public-listed company [8I Holdings Ltd (ASX)] with a market capitalization in excess of S$150,000,000 within 6 years. Today, 8I Holdings is a highly successful investment and education entity, enriching the lives of countless individuals and empowering their growth financially, emotionally & mentally. Ken is also the founder of JM Asia Pte Ltd (2003) which continues to operate today as a branding and marketing agency in Singapore. For his achievements and outstanding results, Ken was awarded the Spirit of Enterprise, Honoree Award in 2005 by the President of Singapore. A multi-millionaire, Ken has achieved his dream of being financially free before the age of 34 by applying his unique investment style of value investing from various mentors and modelling the investment strategies of Warren Buffett. He has been featured on national TV, radio, online & print media such as The Straits Times, The Sunday Times, My Paper, Reader’s Digest, Smart Investors, Shares Investments, 938LIVE and 958FM. Ken believes in paying it forward and dedicates his efforts to educating the public in value investing & taking charge of their financial future.

Number of Entries : 29

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$600.00 Dividend Cheque

More dividends! My money works hard for to produce more money for me to reinvest. Value investing rocks!

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