What would I do if I had $750,000 to start investing?

By now, I have almost 2,500 blog posts here in ASSI and most of them are about personal finance and investments although not all of them are related to investing in stocks.

Sometimes, I worry if I am sending the right messages to readers and I am actually quite happy, even grateful, when readers write to me to clarify their doubts. I try to do a good job in communication but there will be times I can do better.

I received a letter recently from a reader which sent alarm bells ringing in my head:

Dear AK

Thank you very much for sharing your knowledge because i am learning a lot from it.

I am considering investing Saizen Reit which yield 7-8% p.a. If i do my mathematics right, i will need 750'000 to yield $5000 per month to support our family household expenses.

Correct me if i am wrong.

If i have $750'000 cash to invest into Saizen Reit, wouldnt it be better investing the money elsewhere. My question is would you invest $750'000 all into Saizen Reit to give you passive income $5000 per month.

Please forgive my ignorance.

Regards
B

My reply:


Hi B,

Welcome to my blog. :)

You will have to understand a couple of things:

1. Investing in a REIT is not like locking money in a fixed deposit. So, you shouldn't be looking at yield and yield only. It is more than that.

2. Putting all your money in a single investment to have the income it generates cover all your household expenses exposes you to concentration risks.

If I had $750,000 to start investing with, I wouldn't put all of it into Saizen REIT or any one single investment. I wouldn't be fully invested either.

Without knowing more, I cannot say what I would do in your shoes but although my own investment in Saizen REIT is a significant part of my investment portfolio, it is not my entire portfolio.

Best wishes,
AK


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Related posts:
1. How to have peace of mind investing?
2. Income investing and position sizing.
3. Saizen REIT: Is the DPU sustainable?

Universal Studios Singapore and a lesson in investment.

I spent a whole day in Universal Studios Singapore with my family today. It was my first time there and I was pretty impressed.

We went in at about 10am and left at 8.20pm after watching the fireworks. We got our money's worth, I guess.

One thing we did quite a bit of was waiting for our turns to get on the rides. One particular ride made us wait for more than an hour for our turn. It was the Transformers ride. After the ride, I told my mom that it was worth the wait. I think it was even better than the Jurassic Park ride which we got on after a pretty short wait in the morning.

I told myself that some things are worth waiting for. We just need patience.

Now, some people tell me that they feel silly holding on to cash waiting for a crash. Some people tell me that the opportunity cost is too high to maintain a war chest.

I won't tell them that they have to maintain a war chest. I mean the choice is theirs to make, isn't it? However, I would ask them if they are very sure that the stock market would not experience a crash.

If they think that it is only a matter of time that we see a bad crash, then, what is wrong with having a war chest ready? The opportunity cost of not having a war chest ready could be really high then. Don't you agree?

My souvnenir from Universal Studios Singapore!
I hope you don't get too freaked out by my hairy legs. -.-"

When people ask me how I manage to do so well in the stock market, I usually tell them that most of my big winners were purchased during severe market downturns. I could do this because I had a war chest or two ready.

During the GFC, my war chests were filled to the brim. Friends were amazed as I pushed out war chest after war chest to buy battered down dividend paying counters then.

"If you took our top 15% decisions out, we'd have a pretty average record. It wasn't hyperactivity but a hell of a lot of patience. You stuck to your principles, and when opportunities came along, you pounced on them with vigour." Charlie Munger.

So, be 100% invested now or have a war chest ready? The decision is yours, of course.

"Patience is sometimes the hardest part ..."
Source: Little Book of Value Investing.

Related posts:
1. If we want peace, be prepared for war.
2. Get paid more while waiting for war.
3. Revisiting AK's simple strategy.