How to Build a 6-Figure Investment Portfolio (Part 2)

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Previously, I talked about how patience can help build you a six-figure portfolio.
I also revealed some âbehind-the-scenesâ activity on how we built our dividend portfolio.
Today, Iâll talk about what else you should be doing while youâre waiting to invest in the stock market.
How to Zoom in on Investment Opportunities
How do we know which companies you should focus on?
And how do we know when is a good time to add these companies to our portfolio?
The answer is you need a watchlist.
Think about thisâŠ
Before you can even invest in a company, you must first know which companies are worth investing in.
And in order to do that, you need to build a watchlist of great companies that youâd really like and want to own.
These are companies that you should know inside out and willing to hold onto for the next 10 to 20 years.
For example, some of the companies that are on my personal watchlist include:
- Visa
- Adobe
- Alphabet
- McDonaldâs
- DBS
- SATS, and 18 others.
And then companies like Singapore Airlines, American Tobacco Company, Snapchat, etc. will never make it to my watchlist no matter how attractive their growth stories are or how cheap their valuations become.
With a watchlist, I am not distracted by hot stocks or the flavour of the month.
I have a clear idea about the kinds of businesses I want to own and should keep my focus on.
So, here are some questionsâŠ
Do you have a watchlist of stocks?
If you donât, itâs time to start one.
And if you do have one, how many stocks on your watchlist are great companies you know inside out?
How to Make Clear Investment Decisions
When youâve done your research and understand a business like the back of your hand, youâd be able to tell if a drop in share price actually represents an investment opportunity or a sign that the long-term fundamentals of the company are affected.
On the other hand, when youâre unsure about a company and its fundamentals, youâd be hesitant to make a decision even if the opportunity presented itself.
Let me share a recent storyâŠ
Back in October 2017, we published a case study on Tencent Holdings in Alpha Labs.
FYI: Tencent is a social media giant in China that owns WeChat and QQ. It is also the worldâs largest video game company.
After going through Tencentâs business model and financial performance, it seemed like a great company to own with plenty of foreseeable growth years down the road.
From FY2012 to FY2016, revenue had grown at an annualised rate of 36.4% and its stock price hit HK$352 in October 2017.

Its price, however, was also pretty rich at 52 times earnings. Yes, Tencentâs a growth company but its valuation was keeping me on the fence.
As a growth stock priced to perfection, any slowdown in growth that didnât meet the marketâs expectation could send the stock price tumbling down.
Should I just jump in now and ride the wave or should I wait for a better valuation?
What if the share price continued to rise higher?
Would I miss out on an âopportunityâ to invest in a great company?
It was a hard decision to make, but itâs during times like these that I remind myself of quotes such as this:
“Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” â Warren Buffett
If you are not comfortable with the valuation, then simply place that company on your watchlist and wait.
In the end, that opportunity for Tencent did come.
In 2018, the Chinese government decided to ban releases of new video games in an effort to combat gaming addiction among its youth.
Because of the new regulations, Tencent was forced to shelf the launch of major games in China and posted its biggest earnings miss in 10 years. Investors started to sell down the stock due to fears that the new regulations would stall Tencentâs future growth and revenue.
I remembered posting on our Instagram Stories about waiting for Tencentâs valuation to go drop further, from a P/E of 40 to 35 to 30âŠ

In October 2018, with Tencent trading at 31 times earnings, it finally looked like a great opportunity to buy a piece of a great company â which I did.
(In fact, Tencent fell further to a low of HK$252 in November, which just goes to show how hard it is to time the market.)
Today, Tencentâs share price has rebounded to HK$518.5 (as at 2 July 2020).
If you bought the stock at HK$252, youâll be sitting on a 105.7% gainâŠ
Thatâs like doubling your money plus moreâŠ

I know it looks as if I writing all of this based on plain hindsight, but I always wanted to share my personal experience âwaitingâ for Tencent.
(Thus the mobile screenshots below which I took as the situation unfolded back in August and October 2018.)
Opportunity Knocks More Than OnceâŠ
During the peak of the coronavirus epidemic back in March, Tencentâs share price again.
It crashed from HKD416 to HKD334 and we once again were presented with another chance to buy into TencentâŠ
(Note: this article was first published in February 2020 before the market crashed in March).
Again, youâll notice the same thing happening again.
Know exactly what you want to investâŠ
And wait for the right valuation.
I had the opportunity to invest in Tencent back in 2018 because of the Chinese governmentâs regulations.
If they had never intervened, I may not have had that opportunity in the first place, and Tencentâs stock price may have continued climbing ever higher.
But hereâs the thing⊠itâs OK.
Iâve missed out on opportunities like Parkway Life REIT and Mapletree Commercial Trust before (mainly because they were not on my personal watchlist then).
And although I do feel like I missed out on those great companies, I know that another opportunity to own a great company will always come along.
The idea behind building a six or seven-figure portfolio is not about jumping from one hot stock to another, but to focus on owning a handful (or two) of great companies for the long term.
Why A Watchlist Is So Important
In our journey as an investor, we may come across a number of great companies that we really like but are too expensive at that point in time.
When you do, add them to your watchlist. Every month, have a look at these companies and evaluate whether their valuations match what youâre willing to pay.
Thatâs it.
As long as you invest in great companies at great prices and ride their runway for growth, your portfolio should do quite well over the long term.
And if you combine this with what I shared about saving your capital in Part 1, then building a six or seven-figure portfolio is definitely attainable for anyone is patient and willing to focus on the long game.
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