Uncle8888 has serious doubt as AVERAGE retiree; he can just depend on dividend investing to support his lifetime household expenses with yearly inflation.
Certainly; he needs more than just dividend investing strategy to be sustainable!
So you believe when you build an investment portfolio to generate the required dividend income to support your household expenses you can FIRE or retire?
Sure?
In long-term investing, your account size really matters - CW8888
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Ask Trainer at next dividend investing seminar to FIRE how?
ReplyDeleteHe will tell you leverage up & buy Reits! LOL!
DeleteOK, we have the data to work out a possible local investor doing regular STI investing over the last 20 years. Singapore stocks are well known as being relatively high-yielding for a developed country.
Based on MSCI, the total CAGR for Singapore large blue chips since Jan 1999 to Sep 2019 (20.75 years) is 7%. This is possible only if you re-invest your cash dividends.
Let's say our fictional investor started in Jan 1999, and was able to RSP $6,000 every quarter into an STI index fund or ETF. He collects the cash dividends & re-invests in the next quarter RSP (this is important).
By Sep 2019, his portfolio will hit just over $1.1M
The current TTM dividend yield of STI ETF is 3.9%. Hence he's now getting about $43K per year or average $3.5+K per month.
A simple but DISCIPLINED dividend investing to RETIRE is possible, but is NOT EARLY. Most likely the average investor will need to conscientiously invest even longer, say over 30 years, to have a safer & more sustainable retirement.
Most people will koon & eyes glazed over if you tell them need 30 years of hard work & slogging & yes sir/no sir to boss. Hahaha!!!
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DeleteJust a rough estimate....
DeleteInvest $2K every month for 20 years = 480K capital
Total shares accumulated = 207,350
Average cost is about $2.30
Market value (Sep 2019) = $646K
Dividend $0.12 per share
Total dividend for 2019 = $24.9K
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In summary,
Capital invested $480 over 20 years
paper gain $166K (646 - 480)
yearly dividend ~ $24.9K
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Pro:
1. Perpetual dividend ~5% on cost
2. Potential capital gain
3. Sleep well
4. Legacy for next generation
Con:
1. Large investment base ($480k)
2. Extreme patient and ride thru crisis
Can our yearly dividends grow at rate of inflation or more year on year during our retirement without the capability of more capital injection?
ReplyDeleteLuckily Singapore's general inflation has been very low for the past 20 years, roughly 1.7% or 1.8%. Next 20 years? Who knows?? LOL!
ReplyDeleteBut unluckily, Singapore doesn't really have many companies that consistently increase dividends for many years. Especially during recessions. The current STI ETF dividend yield is almost at an annual high in its history going back to 2008. In 2010, its div yield hit a low of 1.9%.
The best way to overcome is to ensure the dividends at the start of your retirement is much more than your expenses. Extra dividends saved up to act as cash shield, or re-invested to (hopefully) further increase future dividends.
Hence going back to the 30 years to build up a big enough portfolio, which is bad news for "average" investors wanting to FIRE ASAP ... but without wanting to take the years of hardships & risks in honing their investing kungfu.
Average savers who want to FIRE in their 30s and 40s better think harder and deeper to beat decades of inflation ahead of them. May have to accumulate few degrees north of million dollar of investment portfolio
ReplyDeleteEconomical rice for two vege and steam fish or cod fillet easily cost 4+ to 7+ depending on location of stall.
ReplyDelete