Passive income: A higher purpose.

Today is the 15th day of the Chinese New Year or Yuan Xiao Jie.  

It marks the end of the celebrations and, traditionally, the Chinese people would spend the evening together with family to have dinner together on this night before starting work in a brand new year.  

During dinner, glutinous rice balls as a dessert is a must.  

Of course, this tradition is more or less diluted or even forgotten in modern day society and most of us would have resumed work before today and some might not even be having dinner with their family tonight.






As if to support my observations, a friend called me out for lunch as I was blogging this.  

Over lunch, I asked if he would be having dinner with his family tonight and he went, "Huh?".  

Well, maybe not this exact word but you get the idea.  

Over lunch, we also talked about time as a form of capital and how when we spend time doing something, it is actually an investment and we must make sure we invest our time wisely because, unlike money, this is a form of capital that we cannot make more of.  






We have less and less remaining time on Earth as we grow older.

Suddenly, I feel philosophical.  

Life is so very short.  

We have only a few decades on Earth.  

Well, there are people who live to a hundred but I don't know if that is a blessing or a curse.  






Do we really mean it when we wish our elders "Chang Ming Bai Shui" (Long life and hundred years old) or is it just plain courtesy?  

I mean if we live to a hundred and have the good health of someone, say, half the age, good, but what is the probability?

Frankly, I don't want to live to be a hundred years old.  I don't want to be full of ailments and be a burden to others.  

When my time comes, I will go.  





So, what am I trying to say?  

We should cherish our loved ones because the time we have on Earth is limited.

I remember this from my primary school days (I went to a mission school):

"We often love things and use people when we should be using things and loving people."  





Overly idealistic?  

Maybe but you get the gist of it.

Humans have short memories and need constant reminders.  

This is especially true for people living in this modern world with all its distractions.  

These distract us from what is really important in life.





When asking myself why am I trying to secure a significant passive income stream in my investments, the answer is quite clear. 

This is so I do not have to spend so much time at work or any time at work at all and, instead, I would be able to spend more quality time with my family. 

In our pursuit of financial well-being, we should not lose sight of the most important people in life, our loved ones.  

I am looking forward to dinner tonight.

Happy Chap Gor Mei! (Hokkien for "Happy 15th evening!")




----
Added on 6 August 2017:

I have been spending every single Sunday with my family and the day started with breakfast with my dad.

A capital question: how much to have or how much to use?

I remember reading a book titled "The Swiss Family Robinson" in my school going days.  It was one of many classics such as "Black Beauty" and "Call of the Wild".  

It is very strange but most people who are younger than me by just, say, 6 or 7 years have never read these books before.  Classics, they are.  Anyway, I digress.

The book in question is about how a family got shipwrecked on an island and had to to use whatever was available there to build a life for themselves and over time, they did quite well.  Very resourceful family.  The father would praise his children if they came up with a good idea by saying: "That's a capital idea!".  

I have yet to come across anyone in real life who would use the word "capital" in the same way.  It might be a very English or a very archaic usage since the book was written in the 19th century.  

Now, that brings me to the topic of this post: capital.  Specifically, capital for investing in the stock market.

Now to do my impression of Forrest Gump: 

"My mama told me that I must pick the right people when I want to talk about stocks which are undervalued as not everyone has the ability to buy."  

Very true but it is hard to identify the "right" people, you might agree.

So, there is an advantage about sharing ideas in a blog.  Visitors who come to my blog are probably interested in investing and making money in the stock market and probably have the means to do so.  

I hope I am right and not being delusional on this point though.

I like the saying that we can bring a horse to water but we cannot make it drink and I've had more than my fair share of horses which do not drink.  Maybe, they were actually camels and my ageing eyes mistook them for horses. 

I digress again.

Back to the topic.  

Now, having some capital is one thing, a question often asked is how much do we need to have exactly before we start investing in the stock market? I have been asked this a few times before.  

A hairstylist asked me if S$10k was enough.  The concept of "enough" is relative like so many things in life.  Very few things in life are absolutes.  However, the question of whether something is "enough" is a very prominent one in life.  

How much to have?

I will use a real life example which happened to someone I know as an illustration.  He had only $5k in savings and went into the market in 2008.  Even with the market running up in the last one year or so, his initial investment is still worth less than $5k today but having used up all of his capital in 2008, he could only watch silently as the market recovered.  Well, he wasn't very silent about it but you get the point.

Then, am I suggesting that if we had only $5k in capital, we should not participate in the market, that we should have more capital before buying shares?  

No. Spare cash that is not needed in the near future or is not part of an emergency fund (e.g. 6 months worth of expenses to be put aside in case of unemployment), should be made to work harder for us.

It is, quite simply, a question of proportion.  Of course, with only $5k, the choices are more limited but the idea is the same as for someone with $50k or $500k.  

Don't plonk all of it down at the same time on one counter or a few for that matter. Always hedge since nothing is ever for sure.  

The question is how much to use for each trade, 10%, 20% or 30%.  

This is up to the individual.  The idea is to reduce risk and taking small steps reduces the probability of a fall.

There is nothing wrong with a $1k value for each transaction and in the process incurring a 3% cost (based on a minimum of $28 brokerage fee per transaction plus other costs) if you were to make more than 10% per annum on that decision.  Nothing wrong at all.  

Rome was not built in a day.  

Wealth building takes time, realistically.  More haste, less speed.

Over time, as our capital grows due to increased savings through employment, capital gains from investments, dividends from investments or some other means, we should not forget this very simple concept.  

"How much to use?" is very often a more pertinent question than "how much to have?".  If you think about it, it applies to other aspects of life as well.

Related post:
Excuse me, are you an investor?