Saturday, April 7, 2012

Single Stock or Diversify better?

Nine months ago, i had a discussion with a friend, who own an inherited asset. The asset is actually in form of JobStreet's share which trade at Bursa with market value of RM240,000 at that time. We discussed the way how to maintain wealth in long term, I did suggest to him, instead of holding on a single stock, the other better option is switch to 3 different stocks. The reason is to have the better return (dividend rate of 7.51% to 8.25%) and at the same time diversify the holding into 3 Investment Grade Stock. However, he insisted that Jobstreet was inherited asset with intention to pass on to his next generation.
Since he disagreed with my suggestion, I could not do anything. I went home and draft 2 different portfolio. My plan is to keep on monitor from time to time. Below is the summary of his holding at that time (Jun 2011): 



"BC" portfolio, was the alternative portfolio which I suggested. If he agreed, he will need to sell "Jobst" and buy Maybank, Maxis and Arreit at the same time. All these 3 counter gave stable dividend income of 7.51 to 8.25%. 

Today (after 9 months), his portfolio look as below, if you notice, the total market value reduced by more than RM50,000 due to Jobst stock price decrease from RM2.80 to RM2.20. This is the risk of holding a single stock.

Now we compare what's happen to "BC" portfolio after 9 months:

The dividend received is 160.51% more than the single stock's portfolio. At the moment, seem diversify with different stable stock win the race for now. Again, we need to monitor for at least 3 to 5 years before we can conclude it. 
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1 comment:

  1. VERY GOOD ...WE CANT AND NEVER PUT ALL THE EGGS IN ONE BUCKET, THANK YOU..still learning.

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