Singapore

Investment tips

INVEST IN COMPANIES YOU ARE FAMILIAR WITH

Investment analyst Jodie Foo quotes investment guru Peter Lynch, who once said: "Never invest in any idea you can't illustrate with a crayon."

Says Ms Foo: "In other words, you should avoid companies whose business models you don't understand."

BE DILIGENT AND DO YOUR HOMEWORK

Ms Foo says: "Buying a company's stock essentially makes you a minority owner of that company, so naturally, you would want to be familiar with its financial health and long-term earnings outlook."

DIVERSIFY YOUR RISK

She adds: "Do not simply invest in one company or even several companies within just one sector.

"A well-diversified portfolio will be better positioned to defend its value against shocks in the market."

HIGHER POTENTIAL RETURNS MEANS HIGHER POTENTIAL RISKS

Says Ms Foo: "If you are targeting high-growth stocks, you should also be prepared for a proportionately greater chance of capital losses."

LOOK FOR RESILIENT EARNINGS

Ms Foo says: "For more defensive stocks, we tend to look out for companies that have resilient earnings, have shown the ability to defend their market share and offer decent dividend yields."

Her preferred stock picks of Sheng Siong, QAF and Thai Beverage have appreciated 21 per cent, 26 per cent and 35 per cent respectively, year-to-date.

She says: "Looking ahead, our top pick remains Sheng Siong, for several reasons.

"Its margins have steadily improved, despite stiff competition, and its plans to open nine new stores will be crucial in driving growth.

"With its healthy balance sheet and strong net cash position, Sheng Siong should also be able to continue offering a dividend yield of about 4 per cent, which makes it a strong defensive stock."

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