My Investment Approach

Overview

My investment strategy is built on timeless principles that favor clarity, discipline, and long-term thinking. The goal is simple: to eventually replace my salary with passive income from wonderful, dividend-paying companies. Here's a quick summary of the key pillars that guide my approach:

👉 Long-Term & Consistent Mindset
Everything starts with a goal — and for most of us, that includes a solid retirement plan. It may feel daunting when you compute how much you need, but it becomes manageable with a long-term view and daily consistency. Time helps reduce pressure, and discipline helps keep you on track.

👉 Focus on Wonderful Companies
While many strategies work, I choose to invest in great businesses — companies with strong, simple, and timeless models, led by trustworthy management, and positioned to grow steadily for years.

👉 Value Investing Principles
Inspired by Buffett and Munger, I apply value investing — the balance of data and judgment. It's about buying quality companies at fair or undervalued prices. This method protects against risk (not overpaying) and provides upside (more room for gains).

👉 Steady Cashflow from Dividends
Dividend-paying stocks create a built-in reward system. These are often smaller but stable companies with a proven business model. Dividends also serve as a safety net — reducing risk and offering regular income that supports the goal of financial independence.

In short, I invest with a strategy that’s disciplined, defensive, and income-generating — all designed to help me build wealth steadily and sustainably.

Long-Term & Consistent Mindset

👉 Beginning with the End in Mind

One of the biggest mistakes I made in life was not thinking ahead — not projecting what the future would look like. But as taught in the book The 7 Habits of Highly Effective People, we must begin with the end in mind.

At some point, all of us will grow old. We will no longer be able to work, and that stage of life often comes with more needs — medical care, daily assistance, and the reality of slowing down. It's not just about our comfort, but also about not becoming a burden to the people we love. Preparing early is a form of love and responsibility.

Many people underestimate how much they need for retirement. They think ₱1 million or ₱2 million is already a lot. But when you factor in inflation and living expenses, that money may only last 1 or 2 years.

For example, if you’ll need ₱1 million per year in retirement, and want to cover that through passive income like dividends at 5% yield, you’ll need at least ₱20 million in capital. That number sounds big — and it is — but it gives us a clear, measurable goal to work toward.

It’s not about getting rich quickly. It’s about having a long-term plan, showing up daily, and trusting the process. Consistency, no matter how small the steps, compounds over time. Time and discipline will do the heavy lifting — if we let them.

👉 Why Thinking Long-Term Makes It Easier

Now that we understand how big the retirement goal is, here’s the good news: it becomes achievable when we stretch our time horizon. What seems overwhelming becomes manageable when we stop thinking in months or years — and start thinking in decades.

Take huge problems like world peace, malnutrition, or eradicating disease in poor countries. Solving them in a few years sounds impossible. But when we think in decades, the conversation changes. We can imagine milestones, long-term strategies, and real progress. Suddenly, the impossible becomes a matter of time and effort.

The same is true for preparing for retirement. Sure, ₱20 million sounds like a massive goal. But if we start early, use sound investment principles, and stay consistent — time will help us get there. We don’t need risky, get-rich-quick schemes that often end in regret. What we need is a reliable, proven strategy.

Our best ally? Compounding. Albert Einstein called it the most powerful force in the universe. Here's what ₱100,000 can become if it grows at 10% per year:

This is the power of exponential growth. Most people make the mistake of thinking in straight lines — linear thinking. So they chase fast gains. But wealth is built by slow, methodical, and exponential compounding.

Long-term thinking also helps us avoid mistakes. We’re not rushing or gambling. We’re focused on steady progress, minimizing setbacks, and keeping our compounding engine running. It’s a simpler path, with less pressure, and it works — if we stick with it.

👉 Consistency Turns Goals Into Reality

Having a long-term goal is a great start — but goals don’t come true by themselves. It’s what we consistently do that brings results.

Charlie Munger once said, "The best way to get what you want in life is to deserve it."
And the way we deserve it is by showing up every single day, doing the small things that move us forward.

Compounding works best when applied to actions we take daily. Here are habits that build a solid foundation:

• Live below your means
  This is the most natural way to build capital. Consistent saving becomes possible when we intentionally spend less than we earn. All great investors practice this.
  It’s better to choose small daily sacrifices now for a better future — rather than be forced to make painful sacrifices later in life, when it's too late.

• Invest regularly
  Growing your portfolio takes time and consistency. By investing on a regular schedule, you build a machine that produces cash flow. The more you invest, the bigger the snowball becomes.

• Reinvest your cash flow
  Don’t consume your dividends — reinvest them. This is what makes the snowball grow faster. Reinvestment accelerates your path to financial independence.

• Invest in yourself
  It’s not just about money. As your capital grows, managing it well requires more wisdom and skill. The world changes fast — and staying relevant means continually learning and growing.

Consistency builds momentum. Habits shape your outcome. With the right mindset and daily actions, your long-term goals become a matter of when, not if.

Focus on Wonderful Companies

There are many ways to invest in the stock market. Some people chase trends, speculate on technical patterns, or try to time recovery plays. These approaches can sometimes lead to quick profits — but they often come with stress and unpredictability.

For example:
📌 A "hot stock" may soar today but crash tomorrow, giving you little time to react.
📌 A company with problems may never recover, despite hopes of a turnaround.
📌 Some speculative plays can look promising on paper but turn out to be traps — due to bad management, regulatory issues, or outdated business models.

Over time, I found that focusing on wonderful companies is the most efficient and satisfying strategy.

These are:
✅ Companies with strong, simple, and timeless business models
✅ Run by trustworthy and competent management
✅ Positioned to grow steadily over many years

If we can find businesses that deliver at least 10% total annual returns, there’s no need to keep searching for new ideas all the time. Once we’ve bought into a great company, we can give it time to do what it does best — grow.

This approach is:
✅ Time-efficient — we don’t need to constantly monitor the news or hunt for the next opportunity.
✅ Emotionally steady — no more worrying about daily price swings or hype cycles.
✅ Logically sound — strong businesses tend to generate good news and attract long-term appreciation.

In fact, investor Terry Smith showed through analysis that even if you don’t buy at the absolute lowest price, holding a wonderful company for 10–20 years still produces excellent returns.

Trying to always find something new is inefficient — especially in a small market like the Philippines. You end up spending too much energy entering and exiting positions, chasing short-term gains, and increasing the chance of mistakes.

Focusing on wonderful companies simplifies everything. It lets us build a habit of buying great businesses and gives us the peace of mind to hold them — confidently and patiently — for the long run.

Value Investing Principles

👉 Managing Risk
The stock market is a strange place. People often say "high risk, high reward" or "low risk, low reward"—but that mainly applies to choosing between asset classes, not to picking individual stocks. Inside the stock market, value investing flips that around: low risk can actually lead to high returns—if you're careful and informed. That’s why managing risk is the most important part of investing, and value investing principles are designed to do exactly that.

👉 Scientific Approach
Value investing is a mix of science and art. The science comes from looking at historical data and basing decisions on facts, not hype or speculation. The art comes from understanding a business—what it does, where it’s going, and why it will continue to thrive. If your approach isn’t based on numbers and real understanding, what is it based on? That’s risky.

👉 Valuation
Valuation is the core of value investing—it's where the name comes from. It's about figuring out the fair value of a company. If we don’t know what a business is worth, how can we know if we're making a smart decision? We aim to buy something worth more than what we pay. That’s how you build returns. There’s no one-size-fits-all formula, as Charlie Munger says—it depends on the business. But if we pay too much, that’s risky. If we pay less than it's worth, it’s safer and gives us more upside.

👉 Circle of Competence
One of the most powerful ideas in investing is knowing what you know—and what you don’t. No one knows everything, so we reduce risk by sticking to businesses we understand. If we bet on something we don’t fully grasp, we’re not investing—we’re gambling. Even if the numbers look good, if we don’t understand the business model, it's dangerous. Munger said it best: It’s not about knowing a lot, but about staying within your limits and maximizing what you do know.

👉 Margin of safety
This is in marriage of valuation. imagine a bridge rated for 10 tons. would you drive a 10-ton truck over it? of course not. you’d probably go for 6 or 7 tons, just to be safe. same in stock investing. we want the price to be far below what the company is worth. why? because like the truck, it's to account for unforeseen things.

As investors, we may have incorrect assumptions, missing info, or unexpected events. and if we don’t have an allowance, we could end up with a disastrous investment.
so we want to buy when there's a margin of safety. it shows humility—that we don’t know everything, so we give ourselves room for error. it’s another form of risk management. the bigger the margin, the better the chances of good returns.

At the end of the day, value investing is all about reducing risk while still aiming for strong returns. It’s not about chasing hype or timing the market. It’s about understanding what you’re buying, paying less than it’s worth, and staying within your zone of competence. These principles work together to help protect your capital—and give you the best shot at long-term wealth.

Steady Cashflow from Dividends

I wasn’t always a dividend investor. But after years of experience—and seeing what works and what doesn’t—I made the shift. And I’m not alone. Many investors I know, even those who came from technical analysis or day trading, have also converted to dividend investing. Why? Because of the clear, lasting benefits.

👉 Process of Elimination
Many newer stock investors don’t realize that investing is not just about picking winners—it’s about eliminating the ones that are not worth your time.
Instead of studying every stock, we narrow down our choices. Focusing on dividend-paying companies helps us limit our search to businesses that:

✅ Have a proven business model that survived through time
✅ Generate actual cash flow—that’s why they can pay dividends
✅ Tend to be more transparent and accountable to shareholders
✅ Are more likely to be stable or growing businesses

👉 Reliable Dividend Payers
My definition of a good dividend stock isn’t about chasing high yields. Even a 3% yield can be enough—as long as it’s consistent and backed by growth.
What we want are stable, reliable dividend payments—not shrinking, but something we understand and believe will continue to grow over time.
That’s what makes them perfect for long-term investors. We can stay invested for years, while the company works hard and grows the dividend for us.

👉 Built-in Risk Management
From my experience in the Philippine market, pure value investing doesn’t always work. Value traps are real—where a company looks cheap but stays cheap for years.
As small investors, we’re not majority owners, so we don’t control the outcome. Time becomes your enemy.

But with dividends, you get:

✅ Paid to wait
✅ Increasing payouts over the years
✅ Growing appeal to other investors as yield improves

Dividend investing adds a layer of safety. It rewards patience. And that’s why more and more investors—especially in the Philippines—are turning to this approach.