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Showing posts with label passive income. Show all posts
Showing posts with label passive income. Show all posts

Reducing risk and volatility on portfolio level.

Monday, January 15, 2024

I have picked up Yu Gi Oh again!

Found that I could play it for free online.

It was something I played but only for a bit and I enjoyed the anime.

I didn't have a deck of my own as it was too expensive to build one.

I had to use a friend's deck.

It was so long ago.

Old brain.

So rusty.

It is a strategy game that really tests my ageing brain which is a good thing.

Helps to slow the onset of dementia, maybe.

Anyway, like I said in a previous blog post, I have been contemplating just buying T-bills and bonds from now on.

Of course, if the yields decline, I could always go back to making contributions to my CPF account.

Regular readers know that I treat my CPF savings as an investment grade bond component of my portfolio which pays reasonably attractive coupons.

This way, I would continue to grow the risk free component of my investment portfolio.




I must realize and embrace the fact that I don't really have to take on more risk anymore although I could still buy more stocks if Mr. Market goes into another severe depression.

Like I said several times before, that would be the time to dismantle my T-bill ladder.

Doing this, buying T-bills and bonds in the meantime, price volatility on the portfolio level would reduce over time.

The last T-bill auction saw a cut-off yield of 3.74% p.a.

Until the Fed reduce interest rate, I am expecting similar cut-off yields for the time being.

I have put in a non-competitive bid for the upcoming auction happening on this Thursday, 18th of January.

That's all for this update.

If AK can talk to himself, so can you!

Related post:
SSB, T-bills, banks and plan.

4Q 2023 passive income: Why the smile?

Wednesday, January 10, 2024

In my first blog post of the year, I said that 4Q 2023 passive income should come in weaker.

This is because OCBC and UOB only pay dividends in Q2 and Q3.

So, missing these major contributors, it is only reasonable to expect lower passive income numbers for me in Q4 2023.

Also, I expected Q4 2023 passive income to be lower, year on year.

This is because my investments in REITs and property developers were generating less income for me in 2023 compared to the year before.

High interest rates are pretty challenging for some entities.

Fortunately, DBS pays dividends quarterly.

Being another substantial investment in my portfolio, hopefully, this would provide a bit of a cushion.

This is especially when DBS increased their dividend per share not too long ago.

My persistence in building and strengthening a T-bill ladder in an environment of higher yields should also help.

All of that went on in my head.




So, how did things turn out?

Total passive income generated by my investments in 4Q 2023 was:

$ 24,849.44

This is some 2% lower, year on year.

It was $25,331.81 in 4Q 2022.

Hmm, the decline was not unexpected.

Still, like the title says, I smiled because it wasn't too bad.

2% decline on a relatively smaller sum.

Not too damaging.

Thanks to strong Q2 and Q3 numbers, full year 2023 registered an improvement.

Q2 and Q3 saw larger percentage gains on relatively larger numbers, after all.

Everything taken into consideration, pretty decent.

Full year 2023 saw a 12% increase in income generated by my investment portfolio, year on year.

Total amount: 

$231,495.19

This compared to $205,999.73 for full year 2022.

To new readers of my blog, this is probably all very impressive.

However, readers who have been following my blog for many years would know that blog posts like this is more to inspire than to impress.




If AK can do it, so can you!

I am not just saying this.

I mean it.

It is about being prudent with money.

It is about keeping our needs simple and our wants few.

It is about being patient and getting rich slow.

It is about being pragmatic and staying invested in bona fide income generating assets.

If it all sounds very boring, well, it is.

It is all about staying grounded and marching towards that pot of gold we know is waiting for us to unearth.

Unearth?

That sounds like work.

Yes, it is.

There is no free lunch in this world.

It is not about going after what could be there but what we know is there.




So, what is my strategy for 2024?

More of the same, really.

I expect my investment portfolio to continue generating income for me this year, barring earth shattering events.

If another pandemic strikes or if war happens on a global scale, expect income generation to slow down or stall.

I can only hope that sanity prevails and that more people in power are willing and able to avoid war on a larger scale.

War is fully avoidable unlike pandemics.

Unfortunately, many human beings are selfish and narrow minded.

When they are put in positions of powers, they could then influence the gullible to do the unthinkable.

This is not a problem exclusive to less developed countries or politically less stable regions in the world, of course.

I am spending some time to talk to myself about this because compared to economic challenges, this is a bigger problem.

Where economic challenges are concerned, high inflation has been tamed or so it seems.

Expectations are for interest rates to start declining sometime this year and there are some experts who think that the Fed will bring interest rate down to under 3% in order to ensure a soft landing.

This is good news for REITs, especially those which are highly leveraged as well as those which have a big part of their debt on floating rates.

For banks, it would mean moderating earnings as rapid interest rate hikes end a strong tailwind.

Still, banks have proven again and again that they have been able to deliver earnings growth over time.

So, staying invested is what I will do.




Before I end this blog post, I will remind myself of the following.

"There will come a day when my passive income generated exceeds my earned income doing what I do.

"If I have always been prudent with money, that is probably the day I become financially free.

"That is when I no longer have to work for money."

No more unearthing to do.

So, believe me when I say this.

If AK can do it, so can you!

List for 2024! CPF BHS. T-bills. 2023 passive income.

Monday, January 1, 2024

Happy new year!


Brand new month and brand new year!

I have been busy the entire month of December and now I have to plan my January.

I have so much to do in different worlds.

Neverwinter, World of Warships and Black Desert Online.

12 to 14 hours of time spent in virtual worlds.

Of course, I must not forget things I must do in the real world too.

January looks like it is going to be another busy month too.

Oh dear.

I wish I had 25 hours a day instead of 24.

Maybe, 26 or 27 hours would be better.

Yeah, bad AK!

So many things to do in my retirement and so little time.

Anyway, as I am growing forgetful in my old age, this blog will quickly outline the stuff I am going to do when it comes to money matters.

1. Top up my CPF MA to the new BHS.

The new BHS is $71,500 in 2024.

This is up from $68,500 in 2023.

Interest earned in my CPF MA will flow into my CPF OA since my CPF SA has already hit the FRS.

So, I will be able to do a $3,000 top up to my CPF MA this month in January.

I will do it earlier than later just in case I forget later.




2. Blog about my updated CPF balance.

My CPF balance will look very "weak" in 2024.

I published a blog last year where I reacted in "horror" that my CPF account was "hacked!"

The bulk of my CPF OA money is in a 1 year T-bill with a cut-off yield of 3.87% p.a. which is why my CPF OA balance is much lower.

That T-bill is maturing at the end of the month.

So, the money is coming back.

I must remember to transfer the money back into my CPF-OA.

3. 6 months T-bills.

I got both 6 months T-bills offered in the month of December 2023.

The cut-off yields were 3.74% p.a. and 3.73% p.a.

Not too bad.

The plan is to maintain my T-bill ladder in 2024.


The yields are still relatively attractive to me.

So, I have already made a non-competitive bid for the auction taking place on 4th January 2024.

If Mr. Market should go into a depression in 2024, it would be time to dismantle the ladder.




4. 2023 full year passive income.

I have been so busy in December that I have not been keeping up with things on the investment front.

I will have to spend some time looking at numbers to account for my passive income in 2023.

I am expecting a weaker Q4 2023 since UOB and OCBC pay dividends only twice a year in May and August.

Year on year, passive income could come in weaker as the REITs I hold are generating less income for me too.

There will be some income generated by T-bills in the portfolio but that won't move the needle much, I suspect.

Hmm.

I think that is all when it comes to money matters and blogging.

Lots of other stuff I have to do but I shan't clutter this blog post.

OK, maybe just this one thing.

I shared this screen-shot of the port of Velia in Black Desert Online in my YouTube community tab on Boxing Day.


You can see my ship docked in the extreme right of the picture.

I am working on upgrading it be like the taller and larger ship with the black sails in the center of the picture.

Work in progress and I should be able to get it in a few more days.

Makes me happy thinking about it.

Will be happier once it is done!

That is all for now.

Look out for upcoming blog posts on my CPF savings and 2023 passive income update.

I will be back!

If AK can talk to himself, so can you!

Unemployed AK grew his passive income from $100K to $200K per year.

Sunday, November 26, 2023

I thought of making a video out of this but I am feeling a little under the weather.

So, I decided to blog about this instead while the thought is still fresh on my mind.

Something I do regularly is to blog about my passive income.

It is a digital record of not only the numbers but also my thoughts at those different points in time.

Of course, the blog posts are also to inspire readers.

Hopefully, more regular folks like me would make investing for income a part of their journey towards financial freedom.

Yes, if AK can do it, so can you.

While having a conversation with some friends recently, they asked me how did I continue to grow my passive income while lacking an earned income in the past 8 years?

One of them reminded me how my annual passive income was closer to $100K more than 10 years ago.

Now, it is more than $200K.




It isn't something I have given much thought to.

So, what did I say?

"I am just very frugal when it comes to money which allows me to continue investing more money although I lack an earned income."

When I left the workforce, the biggest disadvantage was losing that earned income.

While still receiving an earned income, I was able to reinvest all of my passive income and also some of my earned income.

Retirement has definitely slowed the pace of wealth building.

A friend told me that being able to continue to grow my wealth even in retirement is quite impressive.

(Most people see their wealth dwindling in retirement.)

How did I achieve this?

In a nutshell, this is the beauty of investing for income.

I consume the income generated by my investment portfolio.

I do not consume my investment portfolio.

I do not eat the chicken but the eggs laid by the chicken.

However, this isn't the full story.




Remember how my friends did a CSI on my passive income and reminded me that my annual passive income was closer to $100K more than 10 years ago?

Wasn't $100K a year already enough to F.I.R.E. for someone like me?

Well, it probably was more than enough.

So, what was the problem?

I am a worrier.

Hard to change.

I needed a buffer and a significant one too.

How significant a buffer?

Well, consider this.

Even today, with inflation being as high as it is, I recently blogged about how I would probably be quite comfortable with $48,000 a year.

See how significant the buffer is?

If I had retired more than 10 years ago instead of 8 years ago, I would have had a smaller buffer.

If I had spent money more freely, the behavior would have probably carried into my retirement years.

I would not have been able to continue building my wealth to what it is today then.

For most of us, it is far easier to curb the outflow than to grow the inflow of wealth.




So, it isn't just about not eating the chicken but the eggs.

It is also about having more than one chicken or having a buffer.

Don't consume all the eggs so that we can sell some of the eggs to buy more chickens.

Of course, there were also times when buyers offered much higher prices for my chickens.

I used the proceeds to buy even more chickens.

Not all chickens thrive but most of them do.

So, how did AK the early retiree grow his passive income from $100K a year to $200K a year?

No earned income but can continue growing passive income?

Confirm and double confirm!

If AK can do it, so can you!

Related post:
Inflation, passive income and budget.

Increasing bond exposure on higher yields.

Wednesday, October 11, 2023

In my last blog post, I shared how much passive income I received in the first 9 months of 2023.

My investment portfolio is still bringing home the bacon.

However, there is more variety to the bacon now.

Why do I say this?

Over the years, I have been very consistent in saying that I want to maintain a meaningful percentage of investment grade bond in my portfolio.

For a long time, I said that I treat my CPF savings as the investment grade bond component of my portfolio.

Risk free and volatility free, there really isn't a better option for a person like me.

I have a blog post titled "Unless we are very rich, CPF is all we need" to share my perspective on the matter.

This is the link to that blog post: HERE.




Of course, I share my CPF numbers at the start of every year, showing how much interest income is paid to me.

This interest income is not included in my quarterly passive income update.

Why?

The CPF interest generated is not immediately available for withdrawal to be used in any way we like.

We will be allowed to withdraw any CPF savings in excess of the Full Retirement Sum and the Basic Healthcare Sum when we turn 55 and not earlier.

My quarterly passive income report has always been about income generated by my investments in the stock market.

This year, however, my investment portfolio also includes bonds.

In the last one year or so, with bond yields much higher, I have also been buying Singapore Savings Bonds and T-bills.

So, my quarterly passive income report this year has another flavor.

A sprinkling of fixed income.




With bonds being much more rewarding now than 1 year ago, I am going to continue strengthening my T-bill ladder and, hence, enlarge the bond component of my portfolio.

I am a lazy fellow and would always go for low hanging fruits first.

Taking advantage of the CPF-SA and the CPF-MA was an easy decision so many years ago.

Taking advantage of the higher bond yields now is another easy decision for me.

To be sure, the coupons received from bonds will not make an earth shattering difference to me even as they nudge my quarterly passive income a little higher.

However, if we focus on this difference, we are missing the point.

What's the point then?

This is risk free and volatility free.

There is assurance that we will get paid during good and bad times.

This is very comforting to me.

Having such a component in my investment portfolio helps to smooth out rough patches which are bound to appear from time to time.

All else being equal, I will continue to increase exposure to this asset class in 2024.

If AK can do it, so can you!

2023 passive income. Banks & REITs.

Monday, October 9, 2023

I keep a written record of my passive income.

It isn't an Excel sheet as I still very much enjoy using pen and paper.

I spend so much time on the computer daily that spending some time writing on paper is a nice break from staring at the computer screen.

Anyway, I recently published my passive income figure for 3Q 2023.

That came in some 12% higher compared to a year ago.

Thus far, passive income this year has come in relatively strong.

I have said that increasing exposure to the banks since 2016 has been a good move.

For readers who do not follow me on YouTube, I produced some videos recently on investing in banks and REITs.

Here are the links:

Should I invest in REITs now?

This REIT is a MUST BUY but...

Key RISK for Singapore banks!




Remember that AK is not a guru and I am just talking to myself as usual.

All of us have our own beliefs and circumstances.

We should have our own plan.

Do what we are able and willing to do.

As long as we are moving in the right direction, we should do alright.

At our own pace and all in good time.

I am just here to inspire.

I am not here to instruct.

Having said this, I decided to see how much passive income I have received so far in 2023 from my investment portfolio.

$206,645.75

This is slightly higher than full year 2022's passive income received which came in at 

$205,999.73

So, even if I do not receive any passive income in 4Q 2023, I will be OK.




I remind myself that as an investor for income, I should aim for reliable and meaningful passive income generation.

Preferably, income generating tools should generate predictable passive income too.

Always be prudent and stay pragmatic.

This was a recent video on reducing risk without reducing income:

Respect what we don't know!

Not everyone is rich but everyone can be richer.

If AK can do it, so can you!

3Q 2023 passive income: Stronger yet again!

Thursday, October 5, 2023

For readers who have been following my blog consistently, the title of this blog post might invoke a feeling of deja vu.

It is rather similar to the title of my blog post 3 months ago in which I shared my 2Q 2023 results.

That said "Stronger again!"

This says "Stronger yet again!"

AK is so creative!

Well, jokes aside, I really couldn't think of anything more impactful and accurate at the same time.

For those who follow my YouTube channel, this video might look familiar:




Yes, for the first time in a long time, I shared some numbers before the quarter was up.

With that kind of number after only 2 months into the quarter, I could tell that 3Q 2023 would probably beat my passive income received in 2Q 2023.

In the third month of 3Q 2023, income distributions from my investments in many REITs came in.

Although there was a decline in income received from REITs as a whole which was not unexpected given that three of my largest investments in S-REITs paid less, overall passive income for 3Q 2023 still came in higher.

This is thanks in a large part to the much higher dividends paid out by DBS, OCBC and UOB which are all in my list of largest investments in my portfolio.




Decision to increase exposure to OCBC and UOB from time to time since the pandemic has been very rewarding while the decision to stay invested in IREIT Global has not been as rewarding.

Still, I am of the opinion that IREIT Global has room to grow its revenue and that the REIT is in the process of transformation.

There could be some bumps ahead and investors might want to buckle up.

IREIT Global is undervalued if the 6 months lease extension at a 45% higher asking rent for its Berlin asset is anything to go by.

Unlike some REITs like Manulife US REIT, IREIT Global is not in distress even though its unit price suggests that it could be so.

Unfortunately, the aggressive and rapid hikes in interest rates are not friendly to REITs, especially with the "higher for longer" narrative gaining traction.

Still, with a relatively strong balance sheet, substantial sponsor interest and a capable management, I am willing to wait while I am being paid.

This will be short blog post as I do not want to rehash stuff I have said about my investments before.




Oops.

I almost forgot.

So, what is my 3Q 2023 passive income?

In the video I shared at the beginning of this blog post, I said that 3Q 2023 passive income would probably exceed $80,000.

The actual number is:

S$ 84,942.36

This is almost 12% higher than the $75,989.50 in 3Q 2022.

I think I have beaten inflation in 3Q 2023.

Back in 3Q 2022, I said I was stunned like vegetable, and I feel the same way one year later.

What am I doing, going forward?

The next 6 months will see much lower passive income being received without contributions from OCBC, UOB and many other investments.

So, I am going to be extra careful with money.




What about the investment front?

I am staying invested because I cannot tell if the market is going up or down.

Staying invested in bona fide income producing assets means being paid while I wait.

Filling up my war chest for when Mr. Market becomes depressed again.

This is even as my war chest will grow much slower than before as more of my passive income will be consumed from this year on.

I cannot predict but I can most certainly prepare.

If AK can do it, so can you!

References:
1. 2Q 2023 passive income.
2. 3Q 2022 passive income.

SSB 3.32% p.a.: Higher for longer!

Tuesday, October 3, 2023

When I blogged about last month's SSB which offered 3.16% p.a. 10 year average yield, I said I would probably be buying some.

And I did.

Just a modest sum of money as I was "borrowing" the money from 2025.

It was money which I would otherwise have earmarked for voluntary contribution to my CPF account in 2025.

2025 would be the year I turn 54 years of age.

Now, I see this month's SSB offering 3.32% p.a.







What am I doing?

I will be buying again, I suppose.

Again, it would be a modest sum of money.

Although I am sticking to my strategy of growing the investment grade bond component of my investment portfolio, there might no longer be a hurry to lock in higher yields for the longer term now.

I recently produced two YouTube videos on the likelihood of interest rates staying higher for longer.

This is the current day narrative and it seems to have gained traction.

This is probably why the last T-bill auction surprised us with a cut-off yield of 4.07% p.a. too.

Much higher than many expected.

If you have not watched the YouTube videos yet, here are the links:

1. This could be BAD! Why look at bond yields?

2. Reason why it could be a lot WORSE!


The yield curve is still very inverted with the shorter durations being more rewarding.

So, strengthening my T-bill ladder would be more rewarding.

Still, reinvestment risk exists with the T-bill ladder.




I tell myself not to complicate things and simply stick to my plan.

1. Maintain and strengthen T-bill ladder for another source of recurring income.

2. T-bill ladder can be dismantled gradually to buy stocks during a recession.

3. Buy SSBs with money meant for VCs to the CPF as long as SSBs' 10 year average yield is higher than 3% p.a.

There is no way I am going to make all the money in the world.

If AK can talk to himself, so can you!

4.08% FD replaced by 4.07% T-bill! Huat ah!

Thursday, September 28, 2023

The latest 6 months T-bill gives us a cut-off yield of 4.07% p.a.

Yes, AK stunned like vegetable!

I was expecting 3.75% p.a. thereabouts!

Pleasantly surprised!

The narrative that interest rates will stay higher for longer might be true, after all.

Don't know how much longer this situation is going to last but I will just make hay while the Sun shines.

To be sure, I am also doing this while waiting for Mr. Market to go into a depression.

It is bound to happen.

So, it is not going to be if Mr. Market goes into a depression but when Mr. Market goes into a depression.

I want to be prepared when that happens.




It could happen next year or the year after that or it could happen before this year ends.

There are so many different opinions from so many experts that I have decided to stop listening a long time ago.

All I know is that if I am prepared, I will do OK.

With my OCBC fixed deposits which paid 4.08% p.a. maturing this month and next month, I am rolling most of the funds into new fixed deposits with with CIMB.

Not as high as 4.08% p.a. but higher than the 2.7% p.a. offered by OCBC.






I am using a portion of the funds to strengthen my T-bill ladder too which will pay me every 2 weeks.

Fortunately, I did that for the recent T-bill auction too.

My non-competitve bids were fully allotted!

4.07% p.a.

AK is giddy with joy!

Always ready, surely, it is good to be paid while I wait.

If AK can do it, so can you!

Money keeps flowing into my pockets.

Tuesday, September 19, 2023

Following my last three blog posts, I checked three accounts today.

My bank account.

My SRS account.

My CPF account.

Why?

To see how much pocket money I am getting from the recent T-bill auction, the one that took place on 14 September.

People sometimes look down on small sums of money, especially in today's environment of high inflation.

"Walao! $2 only you also calculate!"

$2 is also money.

Small sums of money add up to big sums of money.

Being careful with small sums of money can only help in our journey towards financial freedom.

Don't kick a pup because when the pup grows up, it will come back to bite you.

OK, this is true for regular folks like AK.

For "jin satki" people or high-flyers who make hundreds of thousands or millions of dollars per year, please stop reading.

You have come to the wrong blog.

Still here?

OK, shocking numbers up next.




Anyway, here is the breakdown:

$186 from $10,000 cash.

$148.80 from $8,000 SRS money

$216.16 more in interest income from $52,000 CPF OA money.

So, $186 goes into my current day pocket. 

$148.80 goes into my pocket which can only be unzipped 10 years later from age 62.

$216.16 goes into my pocket which can only be unzipped 3 years later from age 55.

Shocking, right?

Some people might be wondering why "rich" AK bought so little T-bills.




AK is just a regular guy and not "rich".

Why some people don't believe me?

Sigh.

T-bills are risk free and volatility free.

Not a bad way to make sure I have more pocket money now and in the future.

However, I am very aware of re-investment risk as high interest rates might not be around for long.

I will continue to wait for better opportunities to invest for dividend income.

While waiting, there is nothing wrong with getting relatively attractive risk free returns.

If AK can do it, so can you!

Passive income gone! Not growing portfolio!

Friday, September 1, 2023

Today, we cast our votes for the next President of Singapore.


However, my mind was somewhere else and it has been somewhere else for a few days now.

I have been thinking about some money issues.

Regular readers know that I am a worrier.

I used to worry a lot about the possibility of growing old and destitute.

Although my situation has improved over the years, I could not help but continue to worry.

Black swans do exist, after all.




So, over the years, even as my situation improved, I kept trying to grow my passive income.

To be fair, in recent years, I have become much more laid back.

I became less tight fisted with money.

Over the last 10 years, I increasingly spent more money on myself.

Over the last 10 years, I gave my parents more and more financial support.

I did these as I continued to invest more money in businesses which would generate income for me.

I have also been consistently socking away some money in the CPF and, more recently, T-bills and SSBs.

Of course, I did this in the last 8 years while lacking an earned income.




In recent years, I have been publishing blogs on how much passive income I needed yearly to do all the things I wanted to do.

I have always found writing to be helpful in crystalizing my thoughts.

It is also useful if I ever need to remind myself of why I did things the way I did.

Blogging allows anyone who might be interested to eavesdrop to do so, and it could generate meaningful discussions.

In my most recent blog on the topic, I said I needed on a yearly basis:

1. $48,000 for myself.
2. $48,000 for parental support.
3. $38,000 for CPF VC.

Of course, that $38,000 has been diverted into SSBs this year.

With a passive income of $206,000 last year as a guide, I would have an excess of $72,000 each year, all else being equal.

The plan was to continue investing for income with this sum of money yearly.

This would grow my passive income.




Then, why did I say my passive income is all gone in the title of this blog?

Well, the plan has changed.


1. I have decided to increase financial support for my parents again.

My parents are even older than Ng Kok Song or Tan Kin Lian.

No matter how optimistic I am, my parents probably have only 10 to 20 years left to live.

I want them to be able to enjoy their retirement without having to worry about money.

I will give them much larger red packets on their birthdays, Father's Day and Mother's Day.

I will continue to help by paying for some large recurring expenses.

2. I have decided to increase my annual gifts to my siblings.

This will be in the form of larger red packets on their birthdays.

I make more money than my siblings even though I am retired and they are working.

If I can help them to prepare for a financially secure retirement, why not?

3. I am not a Christian but I like the spirit of giving.

So, I will be giving red packets to my family on Christmas.

I started doing this last year, but I will increase the amount of money significantly in the red packets from this year on.

In the spirit of giving, I will also make larger donations to the list of charities I have been supporting.

There are many unfortunate people in this world.

Although we cannot possibly help all of them, if we can help some of them, why not?

It is about doing what we can to make the world a better place.




4. Passive income all gone!

These are the reasons for the title of this blog.

OK, probably not all my passive income is gone but it will be mostly gone.

Consumed.

So, you can imagine that I won't have very much passive income left to increase the size of my investment portfolio meaningfully henceforth.

Having said this, I will continue to making VC to my CPF account or buy SSBs yearly.

This will not change as I believe having some risk free and volatility free investments for income is simply being prudent.

So, how do I feel now that I have decided on all these?

I feel good.

Really good.

It is like a lightbulb switching on in my mind.

In a recent blog, I said early retiree AK still needed $136,000 yearly.

Would I be growing richer or poorer?

That provided the seed for this blog post.

We only need so much money in life and the rest is for showing off.

How to get $200K dividends yearly? Simpler than you think.

Friday, August 25, 2023

The sequel to the podcast I did with The Fifth Person last month is here.

I just watched it and I thought it would be good to tie up a few loose ends.

If viewers should spend some time ruminating on what I said in the follow-up podcast, they would not need to read this blog post.

So, this blog post is more for my benefit since I have a need to talk to myself all the time.

AK is mental.




1. My response to a viewer who said most regular folks would have to speculate in order to generate sufficient capital to get a $200K dividend annually from investments.

There is no need to speculate although we could certainly do it and in the podcast I shared my view on that.

There are other ways to make more money and regular readers know I did some trading and I also had side hustles to make more money.

I also blogged about how we should not wait until we have a larger amount of money before we start investing for income.

Dividends made in the early days, no matter how small, would grow our wealth, and could be used to invest for even more income.




2. Possible to make $200K dividends annually with $2M and how to get $2M in capital?

In the podcast, I said that my capital wasn't $10M, $5M, $4M or $3M.

It could have been closer to $2M.

And that is giving me $200K in yearly dividends now?

How is that possible?

Elementary, my dear Watson.

A lot of what I bought was bought during crises, when Mr. Market was suffering from severe depression.

By now, my experience with AIMS APAC REIT should be quite well-known.

It is one of my largest investments and probably my oldest one.

It generates a distribution yield of more than 10% on cost for me, year after year.

As I got into it in a big way during the Global Financial Crisis, it is a major contributor to my yearly passive income. 

Of course, my investment has been free of cost for many years too.

I have recovered my capital and I am still receiving income from my investment.

So, of the $200K in dividends received last year, a big chunk of it was actually free money.

It is money generated from nothing.

How did this happen?

Time happened.




It is possible to get higher dividend yields during crises if we invest in the right businesses that would survive the crises.

Of course, we could choose to sell these investments if their stock prices should recover later on.

I used the examples of Lippo Mall Trust and First REIT in the podcast.

Regular readers of my blog would know there were others like Saizen REIT, Croesus Retail Trust and Accordia Golf Trust as well.

Selling for significant capital gains grew my wealth.

It gave me more capital to invest with.

We could also choose to sell a portion of our investments like what I did with Old Chang Kee and Hock Lian Seng.

I sold half of my investments in them when their share prices doubled.

So, whatever I am still holding now is free of cost.

And they are still paying me dividends, year after year.

More free money.

This brings me back to the earlier point on speculation.

Why is there a need to speculate in order to grow wealth?




Simply wait for the next opportunity to make significant investments for income like what I did during the Global Financial Crisis.

Invest in good businesses which are able and willing to pay us.

That opportunity came in the form of the COVID-19 pandemic not too long ago.

Of course, regular readers would know that I emptied my war chest during the pandemic and got into UOB at $19 a share.

That is one of my largest investments today.

It is rewarding me with a dividend yield of almost 9% per annum now.

I also talked about how I started buying into DBS at $13 and $14 a share back in 2016.

At $13 a share, the dividend yield is almost 15% per annum today.

Now, coupled with free money I get from AIMS APAC REIT and some other stocks, do you see why I say the capital deployed isn't as much as what some people say it is?




What I have done over the years isn't simply putting some of my monthly salary in fixed income instruments unless we count the CPF.

If that was my method, then, yes, to generate $200K yearly in dividends now, I would need around $4 million in capital today.

I agree this would be insurmountable for most regular folks.

So, I remind myself of what I did over the years and how I made what seemed impossible happen.

This might be a lot for some people to take in.

There is also the fact that my skill as a wordsmith has regressed in recent years.

So, maybe, read this blog post a few times.

Ruminate on it.

I know I had to.

AK is talking to AK here, after all.

Please don't let people tell us what AK has achieved is not possible for regular folks because the capital required is enormous.

It is simply not true.

This blog post is the truth.

Go share this with people you care about and tell them this.

AK is a regular folk too.

If AK can do it, so can you!

Lean F.I.R.E. and Barista F.I.R.E. World of Warships!

Wednesday, August 9, 2023

During my recent podcast with The Fifth Person, Adam asked me if I knew about F.I.R.E.

I told him I only learned about F.I.R.E. after I did it!

And there are so many versions of F.I.R.E. since the time I found out about it.

Of course, if you have been reading my blog regularly, you would have read my piece on Lean F.I.R.E. which I published not too long ago.

I didn't think it was a good idea.




Basically, it meant having only enough financially to fund a very simple early retirement lifestyle.

Lean F.I.R.E. leaves little or no room for error.

Without any buffer, if we should have a situation where inflation increases rapidly and stays persistently high, we could be forced to rejoin the labor force, and when we are much older too.

Of course, if we depend on some passive income to fund our Lean F.I.R.E. plan, we would have to depend on the reliability of such passive income too.

Rejoin the labor force when we are older because we have no choice but to do it?

Not a pleasant thought.






Being a worrier, I cannot live like that and would probably not be able to sleep at night.

I remember some people saying I could have retired earlier.

Why did I wait till I was 45 years old?

For one thing, my plan was always to retire at 45.

OCD.

Another thing, I was worried I might not have enough, and having more money is always better.

Yes, I was building a buffer.

Some might even say I was building a buffer for my buffer.

Or was it a buffer for a buffer that's for another buffer?

Whatever we might call it, it's all good.




During the COVID-19 pandemic, we had an acid test for all F.I.R.E. practitioners.

Not everyone could stay retired as we saw some rejoining the workforce.

I think they would have been mostly people who practiced Lean F.I.R.E.

Anyway, this is just my view.

I am not demonizing Lean F.I.R.E. or anything.

I just feel strongly that if we are planning for Lean F.I.R.E., we must be aware of the potential pitfalls.

Then, I recently read about "Barista F.I.R.E."

That name conjured for me a Bohemian image.

Quite an attractive image, to be honest.




I found out that Barista F.I.R.E. basically meant semi-retirement, or at least that is what people my age would call it.

We would continue to be in the workforce but we would be working part time in Barista F.I.R.E.

So, this means we have more time to do the stuff we like.

For people who are tired of working full time, this is certainly an option.

A viable one too.

For people who want to be a full time gamer like AK, of course, this is not an option.

OK, I know.

Bad AK! Bad AK!




Talking about games, this is my latest warship, the Tier 9 Roon, which is a German cruiser.

In my blog dated 28 July, I shared a photo of my warship then which was a Tier 6 German cruiser.

This being a public holiday, if you should be interested in a free to play video game, try World of Warships on the Asian server. 

I am having a lot of fun and have not spent a single cent.

Use my referral link and both of us will get some freebies in game.

We can both F.I.R.E. at some enemy warships!

World of Warships. (AK's referral link.)






On a serious note, I think that Barista F.I.R.E. seems like a safer choice compared to Lean F.I.R.E. for people who wish to retire earlier with less money.

Barista F.I.R.E. means never leaving the workforce which means staying connected and probably more employable.

In more difficult times, people who have left the workforce for some time might find it hard to find a job, especially when they are much older, and their skill sets might no longer be as relevant.

So, Barista F.I.R.E. allows more room for error.




There are many ways to crunch the numbers for Barista F.I.R.E.

If I were to do it, I would estimate how much I might need for 40 years if I would like to retire by age 45.

This is because the average lifespan for males in Singapore is 85 years old.

Of course, I am being very cautious here because I would invest for income and not just have the money sitting in a savings account to be drawn down.

However, in an extremely unthinkable situation where passive income froze, then, I would have to draw on my savings.




Then, after estimating how much I might need for 40 years, I would need to estimate how much my part time job would pay me in those 40 years.

Subtract that expected income from the expected expenses for 40 years and I would know how much money I must have by age 45 before I could execute Barista F.I.R.E.

Of course, if we factor in the expected passive income from our investments, then, the amount of money required before we could enjoy Barista F.I.R.E. would be reduced.

Anything to add?

I will say that for Barista F.I.R.E. to be quite comfortable and worry-free, we should still keep an emergency fund.




We must be ready for the possibility of not only our passive income slowing to a trickle or drying up completely (if we have been wise enough to invest in some income generating assets,) we must also be ready for the possibility of losing our part-time job.

Peace of mind is priceless.

Don't just say it.

Make sure we have done enough to truly have peace of mind.

Neither Lean F.I.R.E. nor Barista F.I.R.E. is for me.

They are watered down versions of the original concept of F.I.R.E. but they could be what some people want.

Quite possibly, some people might even need them.

Have to be fair.

To be sure, I am not judging anyone for choosing these forms of F.I.R.E.

It is never my way or the highway.

As usual, I am just talking to myself.

If AK can talk to himself, so can you!

Happy National Day!

Visit AK's YouTube Community page: 

https://www.youtube.com/@A.Singaporean.Stocks.Investor./community

References:
1. Retirement drawdown strategy.
2. Avoid Lean F.I.R.E. and struggling with higher costs.


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