Since retiring from his full-time job as salaried employee in 2016; Uncle8888 has transited his yearly goals from growth-dividends to dividends-income and finds that dividends-income yearly goal is easier and within his control to achieve the expected target or at least nearer to target. It is a matter of calibrating his War Chest to to achieve!
2021 is more or less done!
Looking forward to 2022 yearly goal - buy more or trade more whichever comes first!
Now, he can understand why younger investors also choose to set dividend income goals! LOL!
Posts
CW,
ReplyDeleteHello! The crux is not Growth-Dividends or Dividend-Income lah!
The secret sauce is that you have a WAR CHEST!!!
If you are 100% vested just to have enough dividends to survive, how to buy more or trade more for 2022??? Wink.
The stark reality is we can't depend on being 100% vested (minimum PC requirement) to plan for passive income during retirement.
We need to have spare cash rotting as reserves or opportunity fund (recommended PC requirement) to balance out those years when companies suspend or reduce their dividends.
If not, we may be susceptible to snake-oils peddling, "Not enough captial for passive income? Just use leverage! Easy!"
We saw how that movie turned out during March 2020...
That strategy of increasing passive income through leverage is like beating our faces swollen to look fat!?
If want to use leverage, might as well shoot for CAPITAL GAINS in Growth stocks instead!
Make enough, then rotate to boring dividend stocks during retirement or hide in CPF (old liao, no bxlls).
Only bei kambing doesn't know to do leverage to upsize wealth building despite years of investing in the market! Thumb down!
DeleteLeverage is fire.
DeleteIn the hands of a craftsman, steel can be forged.
But if "children" play with fire...
Uncle8888,
ReplyDeleteThink you're using the 2 years cash expenses bucket method?
So the current dividends & realised profits are mainly used to top-up the bucket for future years.
Warchest is to also cure itchy fingers for small position-sized trades while waiting for 20++% crashes.
Once you've conquered your designated mountain, no need to risk chionging up yet another mountain, unless got big helicopter willing to fly you up (like a big bear market).
Staying rich requires different mentality than getting rich.
Well said! Staying rich requires different mentality than getting rich.
ReplyDeleteWith the current low interest, use of leverage to earn kopi money can be very "safe" and doesn't require the hands of a skillful craftsman or the business acumen of WB.
ReplyDeleteHave recently been offered an equity/housing loan with a 3-year fixed rate of 1.12%. Those above 55 with fully or substantially paid up private properties may use such loan to refund CPF sum withdrawn for your private properties purchases. With a spread of 1.38% (2.5% minus 1.12%), a $1 mil loan will earn you $13,800 a year, totally risk free!
Sadly, equity loan is not open to HDB owners, even your are one of those lucky $ million HDB owners
retiree5559,
DeleteI got one question.
Did you take up the equity/housing loan to arbitrage the interest rate difference you shared with us?
yes, but haven't decided where to put the money. Refund CPF OA is one option, absolutely risk free, but lower return. May purchase good grade corporate bonds, still looking around, current yield too low, monitoring Fed rates closely for the next few months. margin financing for equity not for a conservative retiree like me
ReplyDeleteretire5559,
DeleteThanks! I remember you're the rare corporate bond specialist here ;)
Was a bit curious why the CPF option unless there's nothing better out there...
Its great to have diversity at this watering-hole!
Now we just need some old fogeys who are into cryptos to share their experiences here. It would make the discussions here even more fun and scintillating!
SMOL,
ReplyDeleteNot a "specialist" lah, just an amateur bond investor. In terms of value, my current bond holding ranks fourth after property, equity (own picking), equity (ETF/unit trust), in that order (unfortunately no crypto). Hope my very little knowledge of corporate bonds is of use to participants of this watering hole who wishes to diversify. I gained in reading the exchanges, even I may disagree with the views.
The global bond space is ~3x the global equity space. To be a successful bond investor actually requires more works & in depth expertise than equity investment, hence the raison d'etre for the credit rating industry and big names like S&P, Moody, Fitch. With careful selection, corporate bond holders are actually more "secured" than equity owners. This is due to the higher priority in the queue in the event of insolvency, i.e., safer to hold bonds issued by, say CapitaLand, than to hold its shares.
Trite knowledge that bonds give lower return to equity over the long term. Tipped my toes Into corporate bonds only after the low interest environment thank to GFC. The idea is to Use other people money (primarily equity loans, occasionally priority/premium financing if good opportunity presents itself, such as the Thomson Medical 3 year/4.8% coupon IPO in July 2019) to gain from the spread between bond coupon and borrowing interest.
Response to query: reasons for considering CPF instead of corporate bonds (as was the case all these years) - retirement + age! Corporate bonds yield is very low currently (just look at Singapore Saving Bond), May get higher yield for the longer dated bonds (best is perpetual) (my stomach & risk appetite not strong enough for junk bonds). But with age catching up & loss of regular salary, no longer in a mood to hold long dated/perpetual bonds (with expected inflation and rise of interest, probably have to hold such bonds for years (bonds yield & prices are in inverse relation). CPF will give that peace of mind
retiree5559,
DeleteWell, its not everyday we hear from retail talking about arbitrage opportunities in corporate bonds ;)
Ah! Another property heavy Tarzan in our midst! Which meant most of your networth is made OUTSIDE of CPF.
Yup, CPF is great for coming down the mountain.
Especially for those who have embarked on the Earn More path during their younger days, and have now decided to dial back risks to take it easy during their golden years.
Contrast this to those who have just voluntarily contributed to CPF for 30-40 years on the Save More path. Flushed with CPF funds in their 60s, they suddenly discover their "animal spirits"!? Look! Its now or never when making up for lost time...
Imagine being seduced into perpetual bonds, overseas properties, SPACs, and what not...
The earlier the ones gets to understand how the game plays, the better chance they can achieve some financial stability in future lor. Now so many trainers around teaching young people how to create alternative income through dividend. Compared to current low interests packages offered by banks and insurances, naturally dividend are more attractive. Need to be careful not to fall into 'dividend traps' thru.
ReplyDeleteAh.........what else can beat the yearly 2-3% inflation!!!!