All Time Highs? Keep Cool and Focus on Cash Flow

The Straits Times Index (STI) has been climbing. If you’ve been invested for a while, your portfolio is likely looking very green. It’s an exciting time, but it also brings a unique set of emotions. We get a sense of satisfaction from seeing our holdings appreciate, generating large capital gains. But it's also mixed with a nagging anxiety that these capital gains would disappear once the market corrects. 

My Anchor in Cash Flow

While capital gains are nice, they aren't my primary goal. My portfolio is first and foremost a cash flow generating machine. 

My main benchmark for success isn't the market value of my portfolio, which can swing wildly based on market sentiment. Instead, I ask a simpler question: "Is my total dividend income growing year over year?"

This focus on ever-growing cash flow anchors me. The dividends I receive are real, tangible returns paid from the actual profits of the businesses I own. They are a direct reward for being a part-owner, and unlike capital gains, they don't disappear when the market has a bad day.

Price Still Matters, Buy With Caution!

At high valuations, the numbers are simply less favorable. Price-to-Earnings (P/E) ratios are stretched, and dividend yields are compressed. While we might expect a great business to eventually grow into its valuation, a high entry price reduces our margin of safety.

The last thing we want to do is buy high out of FOMO, only to panic and sell low when the inevitable correction comes. That's a direct violation of the most important rule: investing in a way that lets you sleep soundly at night. The solution is to be patient and only buy at a price you are truly comfortable with.

My Plan for the Coming Months

I have decided to stop chasing the high-flyers for a while, and try to look for pockets of value where they still exist. 

Banks: I plan to add to my position in UOB. While DBS and OCBC have performed very well, UOB has been a relative laggard.

S-REITs: I recently added to my holding in CapitaLand Integrated Commercial Trust (CICT) and plan to add others when I have available capital. With the Singapore Overnight Rate Average (SORA) on a downward trend, I see REITs on a path to recovery with both capital gain and increased dividends possible.

How are you approaching the market at its current highs? Are you buying, holding, or waiting on the sidelines? I'd love to hear your thoughts.

Disclaimer: This blog post is for entertainment purposes only and does not constitute financial advice. Please do your own due diligence.

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