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How to get $50K in passive income by investing in stocks?

Saturday, April 18, 2015

Extracted from a reader's email:

Hey there ak,

I was just wondering if your willing to answer some of my questions.

A little background, I'm 32 this year. Yet to marry, planning to.

I was always interested in trading, have tiny experience while working part time in a stock training center. 

Anyway, I seriously want to achieve financial freedom. And stumbling upon your blog was super!! And I want to be an income investor!!

Been reading up and giving myself till 2018 to start investing. There is still so much to learn. I'm still currently "know nothing" phase. Haha.. 

I don't have much cash. Since my wedding is around the corner. Most of it is tied up. 

So I decided to take up the POSB invest plan, 500 for the next 4 years. Should end up with 20k roughly. Which I intend to invest in 4 counters (by 2018).

My aim is to get 50k passive income.  But from my calculation, (assumption on 2014 dpu) I need 800k. No idea what I'm doing wrong. 

Anyway, since I can't amass such an amount, I was planning to, POSB invest plan to 20k (withdraw full), invest in 4 counters by 2018. 

And start OCBC BCIP 1.2k per month for 4 years get roughly 70k, invest as per my plan (counters to have by 2022) and again start another OCBC BCIP to amass cash for investing. (800k will kill me le :( , sianz)

From your view point, do you think I should do this way? As in invest every few years?  

My concern is, this will take me very long to achieve my 50k target. Your advice please.

Thank so much for blog, it's in line with my goals. And I'm reading it everyday at work.

Fellow investor (to be),


AK's reply:

Hi P,

Welcome to my blog and I am happy to read that you are inspired to invest for income. 

Investing for income does help to provide a sense of well-being and therein lies part of its attractiveness. :)

OK, firstly, if you are going to put money in the OCBC BCIP or the POSB Invest Saver Plan, you have to understand that these are with long term investors in mind. 

They are investments too but in a basket of stocks. 

So, what about the idea of taking out the money in 2018 to invest in specific stocks? 

Be warned that there is no guarantee that the stock market won't be lower than what it is today in 2018.

(When the time comes and if we need the money, we would have to take whatever price Mr. Market offers.)

The ETFs are not meant to be places where we keep our war chests or emergency funds. 

They are investments.

I would suggest that you continue to spend time reading up and also to concentrate on your career move and your upcoming wedding for now. 

Congratulations, by the way. :)

Be frugal, save money and wait for opportunities to buy income producing stocks on the cheap. 

Hey, you could be buying the STI ETF on the cheap too. Of course, you could start nibbling at some stocks in the meantime. 

It is important to remember that there is really no rush. The stock market will always be there. ;)

How to achieve $50K in passive income from investing in stocks? I think I blogged about this before many times in the past but not in recent times. 

There is really no magic. 

In summary:

1. Increase our earned income.

2. Do not increase our expenses beyond what is reasonable.

3. Save the rest and invest for income.

4. Save the income from investments and invest again.

We can make money in many ways. As long as they are legal and ethical, we want to think of seizing opportunities to make more money. 

People often upgrade their lifestyles as their incomes are upgraded. 

Be meticulous in distinguishing between consumption and investment. Yes, people often mix them up.

A reader told me that he hopes to achieve a third of what I have achieved by the time he is my age because his circumstances are different from mine. 

He wants to have children and his wife stays at home. This is an important thing to remember. 

Our circumstances are all different from one another's.

So, I remind readers not to be fixated with numbers.

The important thing is that their quality of life improves. 

The important thing is that they feel financially more secure, year after year. 

Investing for income will help to do this for them and it will do it for you too. :)

Best wishes,

Related posts:
1. $1m in liquid assets or $120K in passive income?
2. To retire by 45, start with a plan.
3. Seven steps to passive income from the stock market.
4. OCBC Blue Chip Investment Plan.
5. POSB Invest Saver Account.


Sillyinvestor said...

Hi AK,

Great work there in reaching out to another. I am caught in a rather same situation as him.

Married early, kid early.

I did all the things u advise people not to.

I bought a car early, on hindsight there is no regrets as the ferrying of family and time saved for quality family time is precious.

My expenses increase with my pay. A maid etc.

With a "loser" like me who hit all the wrong Check boxes, I am still able to save money for insurance, invest a bit ...

Simply because the Coporate ladder will increase disposal income, returns is not a straight line.

He has read your blog, will most probably made some choices that will be different from what I made.

A bear can skew returns highly to the left or right depending if we are ready for it.

When can I have 800k? I don't know, but I like your ending about not fixated about numbers.

I do all I can, but I can not going allow myself to be miserable over it.

Life is suffering and beautiful enough without numbers

AK71 said...

Hi Mike,

"Life is suffering" or so the Lord Buddha said. ;)

We can only look ahead and hope to do better in future. So, you are right about not allowing yourself to feel miserable. It doesn't do anything to improve the situation. Wise is one who knows this. ;)

Some of us might start later in life planning for financial security or even financial freedom but, for most of us, it is never too late to start. :)

apex property investment said...

Hi, I don't know what is your situation but having a plan and a unwavering dedication to the cause is important. The only hindering block is your WHY? is it strong enough to make you do whatever is necessary to reach financial freedom. Lets take AK as an example, $1, saved is $1, earned. Keep doing that 800000 times and you will have the money. If you are dependent on the stock market ONLY... forgive me, but I think that is very risky.

AK71 said...

Hi Apex,

I don't think he plans on being a full time investor or trader. Well, not yet anyway. ;p

Unless we are born with a silver spoon in our mouth, we need our jobs. Money made from the stock market is a bonus.

There might come a time our income from the stock market is predictable and is an amount that is equal to or bigger than our earned income. That will be when we can start thinking of possibly letting go of our jobs. :)

yeh said...

if u dun mind, i can email you my all portfolio.
i am not show off or what. i have about 380k portfolio and 170k war chest. much yield i can generate. i only give myself 3.5% as i am lousy in stock pick:(

he is 32, i also 32..when i can have 800k also..i wonder.

probably another 5 years..i think

apex property investment said...

Hi AK,

agreed. Process and mindset is certainly more important than technical skills. I believe all of us have our WHYs and if that WHY is strong, he can change his life around. Just wanting to... I believe is not strong to change life. Then again, most people are happy to live their life going through everyday motion like the masses.

Build Mindset, Build Technical Skills, Take Massive Action, be Rewarded.

Anonymous said...

Hi AK,

May i clarify using your concept of achieving financial independence by investing in stock market, please? If passive income from stock market > than your expenses with some buffer, we resigned from our job, thinking we achieved financial independence. What if the market crush, the dividends decreased or the stocks we are holding are much lesser value by then? We will then caught with our pants down since we are unemployed by then? If we do our due diligent using FA, even we can avoid bear market, it mean we will also missed the dividends at that period, which is our "expenses income" for the same period too.

What is your takes? Did i missed out any essence of the concept of achieving financial independence investing in stock market?

Thanks :)

AK71 said...

Hi yeh,

Yikes! No, no. Don't show me your porfolio. I shouldn't be looking at it. -.-"

I think you have been following my blog for quite a while. So, you would know also what I think about how to build wealth. It might not be the way for everyone. We must each find our own way. ;)

AK71 said...

Hi Apex,

Indeed so. If we want something bad enough, we will do something to achieve it. :)

AK71 said...

Hi Frugal Daddy,

When we invest for income in the stock market, ask 3 questions:

1. How is the business generating income for shareholders? Is it bona fide?

2. How sustainable is the income generation? Is the business able to take external shocks and still do well?

3. Do I have a margin of safety buying into the business? Am I paying a fair price or better than a fair price?

If we have invested in sound businesses that will do well in good times and bad, then, we should be able to sleep well at night. :)

You might want to take a look at some of my older blog posts to which I provided links in the right sidebar of my blog. Maybe, start with the box titled "Passive Income: A Journey". :)

apex property investment said...


I think there is enough research into the stock market to justify 4% withdrawal rules etc. Read Prof Wade Pfau's research on retirement theory and in earlyretirementextreme blog, they have even back tested against 30 years of historical data to ensure the retirement amount last. Read more, make an good deduction and move on. Do not overwork. Just enough is nice!

qook said...

Hi yeh, wow your portfolio is impressive, even more so at your age? If you don't mind me asking, how did you accumulate such a big portfolio at your age? Is this your personal portfolio or combined with your spouse?

little toy brush said...

Last 5 years STI had been on a bull run with negligible corrections. So I prefer to look at how ak built the first 50k annual passive income just to gauge the horizon. Studies have shown that most ppl gain a massive part of their wealth after 30 years of compound effects.

little toy brush said...

10 years, don't increase expense, make sure salary increases by 10% a year by means of bonus or job change, anybody that starts out at 2-3k /month can reach 500k. But cannot buy house, car, have kids, have expensive holidays...

Shao Khean said...

Thanks apex and ak for the replies! Indeed, as long as we buy the "right" investment, 4%withdrawal is reasonable. Like ak post on passive income, a journey, it is about going through the up and down with confidence.

If staying invested is full proved, why is everyone holding massive cash for bear opportunities? As long as value is right, we can all throw in, since bear market is no longer a concern.

So what did I missed out this round? :)

AK71 said...

Hi Frugal Daddy,

There could be good investment opportunities from time to time. They are just easier to spot in a bear market. ;p

I like to pluck low hanging fruits and in bear markets, such fruits are more plentiful. :)

Shao Khean said...

I think alike too on the low hanging fruits. However, to generate $50k with 4% withdrawal, we need 1.25 million, fully invested. if we are talking about accumulate sufficient passive income during earlier years so that we can work because we want to, this figure is scary and out of reach to majority. It may take most to accumulate lifetime even with 5-8% returns. What is the key strategy that I have missed out again and again? Haha. :p

My 2nd question will be, do we need $50k for 1 person to live comfortably? maybe $30k is enough? Of course, this is subjective on individual lifestyle :)

Humble disciple seeking AK guidance.

AK71 said...

Hi Frugal Daddy,

The big money is not in the buying and selling. The big money is in the waiting. So said Charlie Munger. ;)

There were times when dividend yields were as high as 25%. Think GFC. Could we see a bear market again? Most certainly. When? I don't know. This is why having a war chest ready is so important while we stay invested. :)

As for how much in passive income do we need? The answer to this question will differ from person to person, of course. $30K per year could well be enough for some now. However, taking inflation into consideration and if we were to retire from active employment, we have to ask the question, "For how long?" So, having some buffer cannot go too wrong. ;p

InsideOut said...

Dear AK,

I came across your blog while searching for investment information and well, the steps to take to be an investor. I'
m 23 this year, still studying. Currently unable to generate income for large investment..
In any case, I would like to ask if you have any tips for someone who is in my position. Possibly show me path to take in order to be an investor like yourself. I believe back when you're my age you have already planned and sort of figured out what you want to do. I apologise if I make any incorrect assumptions.

My end game would be able to have a family and take care of my parents without feeling too much of the financial burden. Thank you for your time reading this. In the meantime I shall continue to explore the wilderness of the internet!

As Mr LKY once said, "Be open, be attentive, be firm. But above all, be polite.

AK71 said...

Hi InsideOut,

At 23, I was a "know nothing" investor, borrowing a phrase from Warren Buffett. -.-"

I recently replied to a reader on FB:

"Well, it took me a long time to realise what suits me. I realise that investing for income gives me peace of mind. I like to receive regular income.

"It also took me a while to understand how things work and what are the questions to ask when it comes to income investing."

It was a journey of discovery.

I am sure that there are many ways money can be made in the stock market. My way is not the only way.

If you were to search "Income Investing" using the search function in the top right hand section of my blog, you will get a list of blog posts which will give you pretty much an idea of what is my way. :)

You are welcome to read my blog and also to listen to the interview that I gave. However, take some time to carefully think what is the way for you. ;)

InsideOut said...

Dear AK,

Thank you so much for your swift reply and I understand where I need to work on now! Thank you very much, I hope you'll still give me words of wisdom when I lost in the future. To good health and successful investment! huat ah!

AK71 said...

Hi InsideOut,

All I have done was to point you in a direction that you could explore. Nothing more. If this has helped in any way, I am happy. :)

I look forward to hearing more about your journey of self discovery in future. ;)

hosea said...

Hi, AK, I just started reading your blog. Am already late for financial planning towards retirement. I am 57. How I wish, I could read this stuff when I was 20.

AK, would like your advise as my age now, I cannot do much, I have SRS account and I bought into Great eastern those policy 5 years plan yearly with the 12k.

Am just looking into passive income such as good dividend yearly for my upkeeping monthly.

looking forward to hear from you.

AK71 said...

Hi hosea,

I will blog a response to your comment. Look out for it. :)

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