Passive income is broadly defined as money coming into your pocket without you working for it. You may have worked at the start or have put money at the start of the business but you no longer works for the money.
For me, I have a goal of getting passive income through the dividends from my stock portfolio. After doing some calculations, i realised that though it is easy to earn money via dividends, it is not easy to have dividends enough to cover my expenses.
For an illustration, let's assume you need $2,000 as your monthly expenses. This means that you would need $24,000 to be credited into your bank account every year. At this moment, for blue chips, i believe the average dividends is about 4-5%. Let's take 5%. If 5% is $24,000, it means you would need to put in $480,000 in the 1st place. For those of you who have that type of money, please ignore my blog, i don't think this is suitable for you. If you think you can slowly accumulate, you can but it would take a long long time. Let's assume that you are 30 years old. If your goal is to have $2,000 as dividends by the age of 50, you would need to save $24,000 per year, which also means saving $2,000 a month. I am not sure how many of you can save $2,000 a month, but i sure can't.
After pouring enough water over your initial fire, I am here to say that though it is hard, there is a faster way. This method has the compounding effect. Let's say your initial capital is $10,000. After the 1st year, you would have $10,000 still in your portfolio(assuming market is stagnant) and the $500 as your dividends. At the start of your 2nd year, assuming you save $10,000 each year, you would have $20,500 as your portfolio. Every time you get your dividends(which will be always increasing), put everything back into your dividend earning portfolio.
With this method, you would be surprised at the rate that the dividends are able to grow. If you saved $10,000 a year, you will have $200,000 in 20 years. Using my method, assuming no change in the stock market prices and the dividends is held steady at 5% pa, you will have $357,192.52 in 20 years. That is a difference of $157,192.52, which is 78.6% more than the normal savings. So what do you think?
Tuesday, August 4, 2009
Tuesday, July 8, 2008
The Mass Misinformed
I am reading "Creating Wealth" by Robert Allen and the 1st page wrote about this message that I think is very true, yet most people don't see it as a problem in the present society. Quote Josh Billings "The trouble with people is not that they don't know, but they know so much that just ain't so."
In this age that we live in, information is "fast and furious". Information flows continuously and is available to anyone with a computer. The old school of thought often taught us to enrich our minds with more information. Yes, I do agree but when you do find information, please filter the good and bad information before depositing into your mind.
In terms of investments, a lot of people i know "invest" on the basis of heresay. They listen to their guru friends, listen to so-call stock experts on TV, newspapers and magazines on their tips to the next growth stock or a fund. To me, I do listen or read such reports, but with a lot of salt. I do agree with some experts when they say that if the news get printed or go on air, it's old news. Furthermore, one can also see that a lot of the experts and "investment houses" are just going with the flow of the market. When it's a bull market, just pick any stock and says it's good and more than likely, the price do go up. But once the price start to nosedive, these "experts" will suddenly change their tack and give all sorts of excuses.
We do live in the information age and due tot he massive inflow of information we receive every day, we are bias towards a certain direction, no matter if it's true of false. For example, for the 1st half of 2007, the construction sector here was a massive boom and the prices of all construction companies shot up to their highs. But if you do some simple calculations, the prices are unsustainable. Some stocks were trading at >100X P/E, when it should be <30X. But due to the positive inflow of information from all medias, this sector was the darling of everyone.
It is not what we do not know. On the contary, we do know a lot, sometimes too much. Most importantly, it is what we know that is not true or inaccurate. We base our decisions on what we know and if what we know is not true, we make the wrong decisions.
Think I really have to filter the information i get everyday.
In this age that we live in, information is "fast and furious". Information flows continuously and is available to anyone with a computer. The old school of thought often taught us to enrich our minds with more information. Yes, I do agree but when you do find information, please filter the good and bad information before depositing into your mind.
In terms of investments, a lot of people i know "invest" on the basis of heresay. They listen to their guru friends, listen to so-call stock experts on TV, newspapers and magazines on their tips to the next growth stock or a fund. To me, I do listen or read such reports, but with a lot of salt. I do agree with some experts when they say that if the news get printed or go on air, it's old news. Furthermore, one can also see that a lot of the experts and "investment houses" are just going with the flow of the market. When it's a bull market, just pick any stock and says it's good and more than likely, the price do go up. But once the price start to nosedive, these "experts" will suddenly change their tack and give all sorts of excuses.
We do live in the information age and due tot he massive inflow of information we receive every day, we are bias towards a certain direction, no matter if it's true of false. For example, for the 1st half of 2007, the construction sector here was a massive boom and the prices of all construction companies shot up to their highs. But if you do some simple calculations, the prices are unsustainable. Some stocks were trading at >100X P/E, when it should be <30X. But due to the positive inflow of information from all medias, this sector was the darling of everyone.
It is not what we do not know. On the contary, we do know a lot, sometimes too much. Most importantly, it is what we know that is not true or inaccurate. We base our decisions on what we know and if what we know is not true, we make the wrong decisions.
Think I really have to filter the information i get everyday.
Sunday, June 22, 2008
What to do with $4k?
Whoopie, I have just gotten my bonus and I should have $4k to invest.
After evaluating my choices, I decided to put this money into high yield stocks rather than speculative or growth stocks due to volality of the current market. Before I go into teh high yield stocks that I am eyeing on, I would just want to write about the 2 growth stocks which has reached my buying price. One is Contel and the other is UOL. Contel has been in my watchlist for a while and I have seen it going from 16c to the present 8c. It has also broke its 52 wks price of 8c but recovered to 8c. UOL has the backing of the Wee family and news that he bought a sustaintiate amount a couple months back at about $3.60 puts this stock into my watchlist. It has been see-sawing between the prices of $3.50 to $4. And 2 days ago, it broke my buying price of $3.50. I will monitor these 2 stocks further before i make a move.
For the high yield stocks, as you can read from my previous blog, I am holding 4 of them, of which 2 were bought using my CPF. One criteria for myself is to diversify the sectors. Currently, my four stocks are a) FSL, which is leasing ships, b) Cambridge, leasing warehouse and industrial properties, c) First Reits, which lease hospitals and homes in Indonesia, Spore and China, and lastly d) LMIR, leasing of malls in Indonesia. I am interested to get some Spore Reits but their yield is low as compared to those I am holding.
Out of the 4 stocks, I will not add to FSL as I think I have quite enough of cash tied to that. Cambridge is on the rage due to rumours of bigger Reits buying it over. I have very little First Reits and would like to up the amount and also to average down my buy price. LMIR has the lowest price of all the 4 stocks.
I feel that out of the 4 stocks, LMIR has the least potential as there isn't much activity about what they want to do. First Reits has expanded into Spore and China since IPO and I feel hospitality is a good business to be in. Cambridge has an advantage of getting bought over, so it has a short-mid term positiveness about the business. FSL has the most activities from its buying and leasing ships and furthermore, the price has appreciated and dividends is one of the highest.
After considerations, I will try to buy First Reits 1st. If I can't get at my preferred price, I will try Cambridge and lastly LMIR. Wish me luck!
After evaluating my choices, I decided to put this money into high yield stocks rather than speculative or growth stocks due to volality of the current market. Before I go into teh high yield stocks that I am eyeing on, I would just want to write about the 2 growth stocks which has reached my buying price. One is Contel and the other is UOL. Contel has been in my watchlist for a while and I have seen it going from 16c to the present 8c. It has also broke its 52 wks price of 8c but recovered to 8c. UOL has the backing of the Wee family and news that he bought a sustaintiate amount a couple months back at about $3.60 puts this stock into my watchlist. It has been see-sawing between the prices of $3.50 to $4. And 2 days ago, it broke my buying price of $3.50. I will monitor these 2 stocks further before i make a move.
For the high yield stocks, as you can read from my previous blog, I am holding 4 of them, of which 2 were bought using my CPF. One criteria for myself is to diversify the sectors. Currently, my four stocks are a) FSL, which is leasing ships, b) Cambridge, leasing warehouse and industrial properties, c) First Reits, which lease hospitals and homes in Indonesia, Spore and China, and lastly d) LMIR, leasing of malls in Indonesia. I am interested to get some Spore Reits but their yield is low as compared to those I am holding.
Out of the 4 stocks, I will not add to FSL as I think I have quite enough of cash tied to that. Cambridge is on the rage due to rumours of bigger Reits buying it over. I have very little First Reits and would like to up the amount and also to average down my buy price. LMIR has the lowest price of all the 4 stocks.
I feel that out of the 4 stocks, LMIR has the least potential as there isn't much activity about what they want to do. First Reits has expanded into Spore and China since IPO and I feel hospitality is a good business to be in. Cambridge has an advantage of getting bought over, so it has a short-mid term positiveness about the business. FSL has the most activities from its buying and leasing ships and furthermore, the price has appreciated and dividends is one of the highest.
After considerations, I will try to buy First Reits 1st. If I can't get at my preferred price, I will try Cambridge and lastly LMIR. Wish me luck!
Tuesday, June 17, 2008
My Buys and Sells for Last Half Year
I have not written in this blog for 9 full months and am pretty ashamed of it. The last 9 months was bad for my investments as the markets tanked. During this period of time, my main investments were:
1) Stocks.
A) Buying of warrants which I failed miserably. I started buying warrants using swing momentum and was gaining a bit, but when the markets start to get irrational, my winnings was wiped out in a blink of the eye and got into more losses. My weakness is that I often do not get out of a losing trade. Mainly trading in HSI warrants under Macquarie.
B) The other investments I have made, which I have gathered and will accumulate, are the high yield stocks. Mainly the reits or shipping trusts. Presently, I have First Reits, Lippo Maple Infrastructure Reits, Cambridge Industrial and First Shipping Lease Trust. My priority is to get the highest yielding stock. Currently, these stocks are giving at least 8%pa dividends. My aim is to accumulate enough to get some passive income from these stocks. Target is $10k/yr from dividends by 2015(7-8yrs).
2) Funds
The funds did badly over the whole period. I made the mistake of putting money into a China fund and it is now <70%.>30%. I have also supported a friend, who has just joined the insurance field by buying a couple of funds. I have not monitored the funds but I know it is losing money.
3) Lastly, over the last few months, I chanced upon an investment which is a bit controversial. It's basically a high yield deposit. As the "bank" does not have the reputation to guarantee the amount, it puts down a collateral to the depositor. I have tried with small amounts over the last few months and have received the interest and gotten back the principal.
I have a few stocks under my radar and is itching to buy but i am very tight in cash. Moreover, I heard that the market has a good possibility of going down again. Thus, I am staying put. When I have the money, I will put most of it in my yield stocks first before considering the others.
1) Stocks.
A) Buying of warrants which I failed miserably. I started buying warrants using swing momentum and was gaining a bit, but when the markets start to get irrational, my winnings was wiped out in a blink of the eye and got into more losses. My weakness is that I often do not get out of a losing trade. Mainly trading in HSI warrants under Macquarie.
B) The other investments I have made, which I have gathered and will accumulate, are the high yield stocks. Mainly the reits or shipping trusts. Presently, I have First Reits, Lippo Maple Infrastructure Reits, Cambridge Industrial and First Shipping Lease Trust. My priority is to get the highest yielding stock. Currently, these stocks are giving at least 8%pa dividends. My aim is to accumulate enough to get some passive income from these stocks. Target is $10k/yr from dividends by 2015(7-8yrs).
2) Funds
The funds did badly over the whole period. I made the mistake of putting money into a China fund and it is now <70%.>30%. I have also supported a friend, who has just joined the insurance field by buying a couple of funds. I have not monitored the funds but I know it is losing money.
3) Lastly, over the last few months, I chanced upon an investment which is a bit controversial. It's basically a high yield deposit. As the "bank" does not have the reputation to guarantee the amount, it puts down a collateral to the depositor. I have tried with small amounts over the last few months and have received the interest and gotten back the principal.
I have a few stocks under my radar and is itching to buy but i am very tight in cash. Moreover, I heard that the market has a good possibility of going down again. Thus, I am staying put. When I have the money, I will put most of it in my yield stocks first before considering the others.
Saturday, September 15, 2007
Selling Centillion
It has been more than 2 months since i posted any blogs. Within this short period of 2 months, a much anticipated correction has occurred. Even before the correction, I was closely monitoring Centillion and i was very disappointed when it issue the new option shares to Equation and Oei Hong Leong. Each subscribed for 948,742,172 shares at $0.008485.
I wondered what was the management thinking. To raise funds, why would they give such a steep discount to these 2 investors? The price was at about $0.20. If any of these 2 investors were to dump their shares even at a discount of 50% of the $0.20 price, they would still have made >1000% of their investment in this deal. It seems too shady to me.
So when the price was slowly falling with weak supports and volumes, I cut my losses at $0.175 about one month after i bought the shares. I was relieve to see that the shares did indeed plunge to $0.10 within the next month(Aug 07).
I wondered what was the management thinking. To raise funds, why would they give such a steep discount to these 2 investors? The price was at about $0.20. If any of these 2 investors were to dump their shares even at a discount of 50% of the $0.20 price, they would still have made >1000% of their investment in this deal. It seems too shady to me.
So when the price was slowly falling with weak supports and volumes, I cut my losses at $0.175 about one month after i bought the shares. I was relieve to see that the shares did indeed plunge to $0.10 within the next month(Aug 07).
Wednesday, July 4, 2007
Centillion the Waste Recycling Turnaround (B)
I vested in this company Citiraya for quite a while before the CIPB came knocking on their doors. It was a darling stock at that time. After the dust settle, the new management changed the name to Centillion and revamped the structure. It is now slowly coming back.
Ever since it was "re listed" in Oct06, it was mostly hovering at $0.15, once going down to $0.11. From early Jun 07, it raised to a high of $0.22. To me, the business model is a sound one and most importantly, a profitable one. Basically, Centillion clears waste from PCB and IT manufacturers. From the PCB boards, they retrieve the gold treads and sells the gold.
Anyway, I believe this is a good company with a new management. Moreover, Temasek and Oei Hong Leong also vested in this company. Thus, when Centillion slowly drops to $0.195, I see that as a resistance and bought 10 lots. Till now, it has been hovering at $0.195-0.21. I see the potential of this stock to go to $0.3 in a couple of months time. My stop loss is $0.16(~20%). So lets see how it goes. I will be back to close this when I finally sells this stock.
Ever since it was "re listed" in Oct06, it was mostly hovering at $0.15, once going down to $0.11. From early Jun 07, it raised to a high of $0.22. To me, the business model is a sound one and most importantly, a profitable one. Basically, Centillion clears waste from PCB and IT manufacturers. From the PCB boards, they retrieve the gold treads and sells the gold.
Anyway, I believe this is a good company with a new management. Moreover, Temasek and Oei Hong Leong also vested in this company. Thus, when Centillion slowly drops to $0.195, I see that as a resistance and bought 10 lots. Till now, it has been hovering at $0.195-0.21. I see the potential of this stock to go to $0.3 in a couple of months time. My stop loss is $0.16(~20%). So lets see how it goes. I will be back to close this when I finally sells this stock.
My Jasper Investment Trade
I started looking at Jasper Investment when it remained in the top volume for many days. Though it hovered around $0.025-0.035 for quite some time, the volume transacted each day was still significant.
Fundamentally, I must admit i did not do a lot of research but I do know that its earning has increased and the company's plans is blossoming.
There is not much TA to be done as the price is quite stagnant. Thus, when the price dropped to $0.025, I bought 50lots. I intend this purchase to be a short one as I hope and believe it will behave like what it has been behaving for the last 1-2weeks. My target is just $0.03 and my stop loss is $0.02.
I was rather disappointed as even thought the price is at $0.03 some of the days, the sell queue was too hugh and I never got the the start of the queue for each time. But to my relieve, my sell trade was transacted, making me a small profit of $190+. Though this is a small amount, it is a 15% return for 2 weeks of waiting. I have traded a small amount for this stock as I have not gained enough knowledge about this company and was only basing on the volume and the small trading band.
Overall, though I have made a good choice in trading this stock, I will not be doing such trades much as I believe in trading in good quality companies.
Fundamentally, I must admit i did not do a lot of research but I do know that its earning has increased and the company's plans is blossoming.
There is not much TA to be done as the price is quite stagnant. Thus, when the price dropped to $0.025, I bought 50lots. I intend this purchase to be a short one as I hope and believe it will behave like what it has been behaving for the last 1-2weeks. My target is just $0.03 and my stop loss is $0.02.
I was rather disappointed as even thought the price is at $0.03 some of the days, the sell queue was too hugh and I never got the the start of the queue for each time. But to my relieve, my sell trade was transacted, making me a small profit of $190+. Though this is a small amount, it is a 15% return for 2 weeks of waiting. I have traded a small amount for this stock as I have not gained enough knowledge about this company and was only basing on the volume and the small trading band.
Overall, though I have made a good choice in trading this stock, I will not be doing such trades much as I believe in trading in good quality companies.
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