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$120k annual passive income from S-REITs next?

Sunday, September 18, 2011

With the end of 2011 more or less in sight, I decided to take a look at how my aim to generate at least $50K in annual passive income from the stock market has fared this year. Of course, compared to the end of 2010, many things have changed. Don't they say that the only constant in life is change?

Saizen REIT was my largest investment up till early this year. The massive earthquake that struck Japan on 11 March 2011 left huge areas of the country devastated, areas which are economically important. I reduced my investment in Saizen REIT even though its buildings were largely unaffected with only a handful requiring repair work.

It was a decision premised upon possibly more difficult times that would hit the country and from a technical standpoint, further upside in its unit price could be capped. So, reading the charts back then, I waited for a rebound in the REIT's unit price and partially divested my investment in the REIT at gap resistance.

Next, I tweaked my portfolio with funds freed from the partial divestment of Saizen REIT. I further increased my investment in First REIT and initiated long positions in Sabana REIT and Cache Logistics Trust after doing the necessary due diligence.

Not long after, I reduced my investment in AIMS AMP Capital Industrial REIT, shifting the funds from that partial divestment to Sabana REIT, in the process balancing the two REITs' weight in my portfolio.

In 2011, thus far, I have received income from the following S-REITs:

1. AIMS AMP Capital Industrial REIT
2. Saizen REIT
3. First REIT
4. LMIR
5. Cache Logistics Trust
6. Sabana REIT
7. Suntec REIT
8. Cambridge Industrial Trust
9. FCOT

Total: $75,785.49.

Therefore, I have exceeded my personal target of $50k in annual passive income generated from investments in the stock market this year and this is from S-REITs alone.



At the end of this year, I will calculate the amount of passive income which S-REITs alone would have generated for me in 2011. It is quite likely that it could surprise on the high side.

Taking the cue from the blogmaster of Bully the Bear, I might have to set a higher target for myself in 2012. What about $120k next? Why not?


12 of this every year? Wah!

I will end this blog post by again saying: "If AK71 can do it, so can you."

Joi Kin! (ala "Yan can cook, so can you!")

Related posts:

Adam and Conrad actually provide the blueprints – and the details – on how to make investing work.

One of the key skills you learn in this book: How to evaluate a business and the potential of its stock – in great depth! Worksheets are provided.

Now: Find out how!


155 comments:

jm said...

hi AK,

congrats on achieving n exceeding ur target! I have been following ur blog and will also set my dividend target for nxt yr soon! however 50k seems abit high for me at this period in life. I am in my mid 30s. Could u share how old were u when u achieve ur 50k of dividend income?

Thanks!

jm

Createwealth8888 said...

Do you think everyone has the same size of your capital as you.

Drizzt said...

that is crazy shit.

FoodieFC said...

wow... ur dividends alone is more than my annual income! And with there is still anther 3months to go, so u will be receiving more dividends =)

Jiayou in reaching ur new target!

Glayz said...

WOW!!! WOW!!! WOW!!!
Totally SHOCKED...
hmmm... how long will it take for me to reach this.... wahahahahahaha

Rookie said...

Ak, can I ask what is the total portfolio in order to generate 75k passive income

Isshin said...

You are inspiring! Hope I can do it some years later... haha...

la papillion said...

Hi AK,

Haha, so open about your passive income? :)

Well done! You should go to celebrate your mini victory in your own way :) Go go go, spend some of that money to make yourself and the pple around you happier!

Anonymous said...

congrats!!

john chia

Anonymous said...

Hi AK,

mind sharing what is your total invested capital so far ?

Regards,
SY

Anonymous said...

Sir, i also want a 50k income, how much money to put into share to create one.

AK71 said...

Hi jm,

Thank you. :)

Last year, I could have achieved $50K in annual passive income from S-REITs alone. I was 39 last year.

However, Saizen REIT's half yearly income distribution policy meant that there was no distribution in December.

I want to say that each of us have different circumstances. So, set a realistic target for yourself and you will not be discouraged.

However, do not set targets which are too easy. What's the point, right?

How do we tell if targets are too easy? If you find that you do not have to make any sacrifices, then, the targets are too easy. Well, that's me anyway. ;)

I look forward to hearing your progress. :)

AK71 said...

Hi CW,

I do not think that the question if everyone has the same amount of capital as I have is a useful one.

A more useful question is how can everyone grow their capital to be a more sizeable one. ;)

Read?
Do you want to be richer?

AK71 said...

Hi Drizzt,

It was a long drawn process. Being able to shit properly after a long period of constipation is a great feeling. ;p

AK71 said...

Hi FoodieFC,

I am almost 40 this year. I believe most of my blog's readers are years younger than me and still have time on their side.

Even for those around my age, hey, I was told that the 40s are the new 20s!

Where there is a will, there is a way. Take baby steps initially but think big. Don't let naysayers put us down.

Thank you for your well wishes. :)

AK71 said...

Hi Glayz,

There is always a journey and a destination.

We might take different routes but as long as we get to the destination, that is what matters. ;)

You might be interested in this:
Roads to wealth creation in the stock market.

AK71 said...

Hi Rookie,

It was after a lengthy deliberation that I decided to blog about my passive income in dollar terms. This is after almost two years of blogging.

I have, prior to this blog post, talked about my passive income in percentages and as a proportion of my monthly salary.

Actually, a reader, OT, has been very good at working backwards and estimating the size of my invested capital. There are enough hints scattered throughout my blog. ;)

AK71 said...

Hi Isshin,

If I remember correctly, you are doing very well in your investments too. Good luck to both of us. :)

AK71 said...

Hi LP,

Well, I did think about it for quite a while before deciding to do it.

Actually, I almost did not publish this blog post after completing it. Haha.. ;)

Then, I decided that since there are so many people like OT who would like to know, maybe, I would oblige.

As for rewarding myself and being generous with family, I have always believed in this. I do hope I stay prudent and not let things get out of hand though. ;p

Good luck to the both of us in achieving our targets for 2012.

AK71 said...

Hi John,

Thank you. :)

AK71 said...

Hi SY,

Please see my reply to Rookie. :)

AK71 said...

Hi Anonymous,

You want to read this:
Seven steps to creating passive income from the stock market.

Good luck. :)

financialray said...

Hmm. Sounds like time to consider a FREE seminar on how to make passive income from S REIT investing. $888 for the actual 1 day course which will take a few hours of your time. Entice with make money even in current financial turmoil. Learn from the expert. One class to consist of 20-30 students.

AK71 said...

Hi financialray,

Haha.. Yes, we talked about this before, I remember.

Nah, I won't feel good making money from people like that. What I know and do, I share freely in my blog.

If people really like my ideas, go ahead and tell people about my blog. Read and learn for free. Sounds appealing? ;)

I am also unwilling to give up my privacy. I don't want to become a public figure. :)

thepotatotimes said...

That is some crazy capital you've got there! Woohoo!

Blackjack

OT83 said...

Hihi AK,

You sound like I am a stalker loh. Haha. Anyway congrats!

Your passive more than my annual work income too! Thanks this is inspiring!

One day I WILL reach there or even more too. :)

All the best to your 120k.

financialray said...

Just pulling your leg and also to alert readers that many so called financial seminars are really meant for the lecturers to make money. They also claimed they want to impart financial literacy and knowledge.
I respect your unselfish style of divulging your investment style.
Good that one of the 80000 millionaires is a financial guru and sharing his way of investment.

qinzheng said...

Hi AK,

Well Done! :)
I am still far far away from that target...haha

Ee Chuan said...

Hi AK

Congrats on exceeding your target and appreciate your candour in sharing exact $$$ amounts.

Wishing you all the best for the next target!

Be well and prosper.

AK71 said...

Hi BJ,

I always tell myself that there will always be taller mountains (and younger ones too). I think I am a small hill. ;p

AK71 said...

Hi OT,

You are a fellow pig and one cycle younger. You have the advantage of time on your side and will definitely succeed in your quest. Just do the right things. :)

AK71 said...

Hi financialray,

It takes all sorts of people to make this world. Everyone needs to make a living, I guess. :)

There are only 80,000 millionaires in Singapore? I was under the impression that 11% of our population are millionaires. I could be mistaken.

As for being a guru, I am really not qualified to be one. ;p

AK71 said...

Hi qinzheng,

Thank you. :)

Like many readers of my blog, you have the advantage of time on your side. Enjoy the journey in the meantime. :)

AK71 said...

Hi Ee Chuan,

Thank you. May you be well and prosper too. :)

奕嘉 said...

Hi AK,
Wow! you are so impressing. Congrats on exceeding your target, you are my inspiration now. :)
By the way, may i know what's the reason you are divesting from suntec reit? Its price is like 1 year low now...

-AK82 ^^

Anonymous said...

AK ah AK, so.. extremely envy you, smart investor. Me still big loss;(
Appreciate if you could advise us of any good buy, keep/sell to grow our account. See my fund sleeping in bank, so pathetic.
Congra & Good Luck AK
JO.............

Anonymous said...

Congrats AK.

@ this moment, I am only 10% near you. Still have a long way to go and I am only 40... feeling sianz. If I had this knowledge earlier.......

I guess that your fund size is close to $800-900k, with an actual investment around $400k and the biggest gains are from your 2 property transactions. No need to verify, just tikam here. ^-^

SnOOpy168

Anonymous said...

Hi AK,

Congratulations!! You have achieved financial freedom,I suppose perhaps even earlier.

Thanks for your blog post, I'm encouraged and I feel many silent readers are too.
Thanks for being open about it, it puts authenticity to your blog post and it shows what one can archieve thru dedication and focus.

Kevlee

AK71 said...

Hi AK82,

Thank you. If my blog post has inspired you, I am glad. :)

I have not done anything to my investment in Suntec REIT for a long time now.

The last time I divested partially was at $1.50+.

AK71 said...

Hi JO,

Thank you. :)

We do need to have a warchest ready to take advantage of any crazy selling by Mr. Market.

So, having cash in the bank is not bad but having too much cash in the bank is unproductive. What if the crash never comes?

My strategy, as you may already know, is to be 50% invested and 50% in cash.

If I do buy or sell anything, I will probably blog about it. :)

AK71 said...

Hi SnOOpy168,

We will achieve our own desired results at our own pace. :)

You probably know that I won't reveal the size of my invested capital but I will tell you that the gains from sale of property are now in my warchest.

My invested capital consists purely savings from earned income, re-invested dividends and gains from sale of stocks. :)

AK71 said...

Hi Kevlee,

Thank you. :)

If what I have done here has injected a greater sense of realism and is able to encourage readers on their own paths to financial freedom, I am glad. :)

Calvin said...

Very nice AK. That's a really good achievement even for your age.

I am still quite far away from that in terms of Passive Income. However, my properties did generate sizeable capital gains.

May I know what type of property you are staying in?

Thanks.

Rgds,
Calvin
http://www.investinpassiveincome.com

AK71 said...

Hi Calvin,

So, I suppose you have sold your investment properties too. ;)

I am now staying with my parents in a condo.

Calvin said...

Hi AK,

Nope I only sold one so far. I still have 10 properties under my belt with only half of them generating Passive Income right now. Still patiently waiting for the others to be completed.

It's really quite annoying waiting for under con properties.

AK71 said...

Hi Calvin,

Oh, I thought you have sold all your properties as you said "did" generate returns.

It has been a long time since I have met anyone who is so heavily invested in real estate (still).

Are these all properties in Singapore and bought with you as the sole owner?

financialray said...

One more thing to learn from Ak...humility. There is always another mountain higher. I like that.

Only with constant reminders and discipline can one stay humble and proper in financial planning.

AK71 said...

Hi financialray,

You think too highly of me. I am full of human failings too.

I am a lazy person by nature and that makes me seek passive income, for example. ;p

financialray said...

Hi Ak

Isn't the aim of financial planning to secure passive income in exchange for freedom?

By the way, why do you expect calvin to sell his properties??You use the word still...i noticed.

AK71 said...

Hi financialray,

Well, financial planning could be for various reasons and passive income is just one possible reason. :)

With regards to Calvin, I have no expectations at all. ;)

I made the comment because most people I know who are heavily invested in real estate in Singapore have lightened their portfolio by 50% to 80%, if not fully divested.

Expectations are for a host of factors which could lead to softer property prices here in the next two to three years.

That is why I asked Calvin if his properties are all in Singapore and if he owns them as the sole owner. It seems to me that he could be taking on an inordinate amount of risk.

OK, I am just being kaypoh. ;)

INVS 2.0 said...

Hi AK71,

Looks like you have trouble now moderating all the hungry comments. Hehe...

But seriously, $75000+ is really awesome for an investor with 9 counters. My concentrated 2 counters can't even give me >$2k. Well, I am just a year into the stock market. Age and time really add a lot of points. :)

If I can achieve $120k per annual, I want to buy a.... err, Lamborghini? :D

Anyway, congrats!

Dividends Warrior said...

Hi AK,

I am also a fellow piggy. 1 cycle younger. ^^

I can still remember all the advise u gave me on S-REITs back in 2009. I read ur blog posts on some of the REITs and they were really useful. Your posts helped me in my S-REITs investments. They convinced me to invest in AIMs, Suntec, First REIT and CACHE. So far, these REITs have served me well enough, especially First REIT and CACHE.

So, I must say a big "Thank You"! :)

Hope to learn more from you.

Raelynn said...

dear AK,

woahhhhhh. i suppose asking what is the percentage of passive income you're getting will reveal your capital size and hence you wouldnt answer ^^" .but having said that, it is true to a certain extent that a more useful question would be how to grow your capital to a sizeable one in order to generate sufficient passive income to live off. growing the capital is the toughest part, methinks, for we cannot predict the herd rationale in the market.

Hwang said...

I need to borrow Drizzt's "that is crazy shit."

Congratulations AK on surpassing your target for this year. 120k doesn't seem to be far away.

I still have 13 years before i hit your age, so hopefully i can manage something interesting by then. Hah.

Temperament said...

Hi AK 71,

Congratulations & Celebration.
You just proof there are more than one way leading to Singapore(ROME).
Ha! Ha!
Cheers.

financialray said...

Wah Calvin sounds like he is also one of the 80 000 rich men in Singapore.
Maybe he is one of those who buy properties for long term investment.

Marco said...

I am still a baby if compare with you. Still struggling to hit MYR12k (SGD4,800) passive income by this year end ... Long way to go.

AK71 said...

Hi INVS 2.0,

The number of comments this blog post has generated so far has been mind bogggling. Really humbling to know that I have so many well wishers. :)

The blogmaster of Bully the Bear told me that he regrets having subscribed to the comments for this blog post because his mailbox is now flooded. ;p

I have to say that the 9 counters mentioned in this blog post are not all that I have. I do have a few other counters (i.e. non-REITs).

Yes, unless we are exceptionally lucky or born with a silver spoon, time is needed to help us accumulate wealth if we do the right things. :)

A Lamborghini? Haha.. Try a Mazda2. ;p

AhJohn said...

Hi AK, I did a rough calculation, around $1500k is needed to generate more than $100k annually. A lot capital for most of people. Congratulations!

AK71 said...

Hi DW,

A full cycle younger. You definitely have time on your side. :)

My memory is a bit patchy these days but I am glad that my blog has been useful in some ways on your journey to financial freedom.

I believe you did your own due diligence anyway. So, the credit is yours. ;)

Let us continue to learn together. :)

AK71 said...

Hi Raelynn,

There are many ways to grow our capital. We don't have to depend on the stock market to do it although it could be most instrumental. ;)

Growing one's capital is no walk in the park for most of us but it is a necessary step. :)

Er... No more revelations. ;p

AK71 said...

Hi Hwang,

Thanks. :)

13 years younger? Well, you have a lot more potential than I had 13 years ago, I believe. I was just stumbling along back then.

You might be interested in this:
Excuse me, are you an investor?

Enjoy the journey. :)

AK71 said...

Hi Temperament,

Yes, there are many ways to riches and there are many ways to build wealth in the stock market.

We have to find the way or a combination of ways which works for us. I am rather open minded.

Thank you. :)

AK71 said...

Hi financialray,

Calvin could well be and would be many times richer than I am if that's the case. ;)

If Calvin is investing in real estate in a group, it would be interesting to know how it works.

I have seen ads in the papers about talks on how to invest in properties with zero capital or very low capital before.

I know this was how a customer of mine got to own quite a few properties too.

AK71 said...

Hi Marco,

Baby steps (pun unintended) to begin with but think big.

Focus on the final outcome always and we will get there. :)

AK71 said...

Hi AhJohn,

Thank you. :)

Definitely did not happen overnight. Lots of sacrifices were made.

Er.. this does not mean that I am agreeing with your estimates, by the way. ;p

Anonymous said...

one thing for sure is that we all are happy and grateful to hear AK's view and posting.

plus, beyond those ad links, i dun think that he gain anything else financially from us. this is what i would call generous sharing.

looking forward to your next regular updates. the next season of AK Journey --- "the road to 120k "


Snoopy168

financialray said...

Hi Ak,

Perhaps this is one of your most commented entry.
Just hope I am not probing, may I know whether your property investments provide you with most of your capital?

AK71 said...

Hi SnOOpy168,

Income from blogging is like a sweet. It is not enough to fill my stomach but it is a nice treat. Wow! Rhymes! ;p

If I am able to get $100 a month from advertorials, ad placements and affiliate programs, it's not bad. ;)

While I am at it, let me do a bit of shameless advertising:

Looking for a book at a good price?
Betterworld books.

Planning your next holiday?
ZUJI Travel Guru.

Find a good deal and AK71 gets a small commission too. Thank you so much. ;)

AK71 said...

Hi financialray,

Gains from real estate divestment is a relatively recent thing. They form the bulk of my warchest now.

Capital used for investing in the stock market is mainly savings from earned income. As you may already know, I am relatively thrifty.

Growing dividends over the years help to pay for quite a bit of my expenses which include yearly vacations.

My annual dividends from ST Engineering at one time was paying for my yearly vacations to Japan.

Having regular dividends to pay for expenses allows me to save more of my earned income which gives me more capital for investment.

I also made the most money from the stock market in the last two years, having bought many shares at depressed prices and divesting most of them for hefty gains.

As the Chinese say, human beings can plan but the heavens will decide. So, the heavens dealt me a set of cards and I played along. Therefore, I have also been lucky.

I knew a young man once who was making money in almost all his investments. When I said he was very lucky, he told me it was 100% foresight! He dumped a load of his mother's money in MPSF four or five years ago, iirc. It crashed 80+%. Unrepentant, he told everyone that it would take five years to recover. Foresight again? ;)

I am rambling.

financialray said...

Thank you for sharing AK.
It is good to ride the waves like you did over the last crisis.

As for co-owning many properties with many other investors, the risk is definitely much higher even though the capital coughed up front maybe less. For property investments, its best to buy in one's own name or with one's spouse. Such impermanence understates the fickleness of relationships.

Anonymous said...

assuming 10% yield
to get 75k dividends, u nid 750k capital!!!

AK71 said...

Hi financialray,

I think you have raised a valid point which I had not thought of. Fickleness of relationships.

I had thought that it would be riskier to invest in all the properties on his own and, probably, stretching his finances in the process.

Anyway, let us see if Calvin would care to enlighten us. :)

AK71 said...

Hi Anonymous,

An interesting assumption indeed. ;)

Anonymous said...

I think 1.2 million invested, to have $75k dividends at this point of the year. Your total net worth is ard $2.4 millions. ;)

Well done! :)

AK71 said...

Hi Anonymous,

The game is afoot, it seems.

Thank you for the interesting deduction. ;)

Could you include your name or initials in future comments? No, this is not so we can contact you to collect a prize. ;p

Musicwhiz said...

Hi AK71,

It's tough to get a yield of 10% consistently. If I used 5% yield then based on $75,000 passive income that would mean a capital base of $1.5 million.

Hope I can achieve this kind of capital base when I hit 40!

I am using you as my encouragement to spur myself to work harder, save more and invest better!

Cheers,
Musicwhiz

AK71 said...

Hi MW,

You are already doing a great job.

I understand you save 50% of your take home pay. That's higher than the average person your age, I believe. :)

As for investing better, we have somewhat different approaches but as long as they get us to Rome, we are OK.

Of course, if you feel up to it, explore new ideas and if you still don't think they are for you, push them aside. No matter.

I am glad you have found this blog post encouraging and I look forward to reading more about your journey towards financial freedom. :)

Wong MG said...

HI AK,

Recently price of Suntec RIET has come down quite a bit.
I would like to hear from you.

Singapore Man Of Leisure said...

Hello AK,

Wow! I went away for company kick-off Monday and what did I find on my return!?

Not so bad having a mind of your own and a little bit stubborn once you have made up your mind :)

Privacy my foot! Peace time and prosperous Singapore have little use for both of us. But if one day "romance of the 3 kindoms" reappers, see you in the political arena. Let's hope we both are on the same side! If not, it will be just as fun too!

You are not "jus"t a bronze-stink guy.

The goat putting a toast to the pig.

Calvin said...

I was just looking down the comment list and I was quite surprised by how many times my name was mentioned :P

However, I will try to address all the comments.

AK,
No, not all of my properties are in Singapore. Only 2 condos are in Singapore of which I am a joint owner.

The rest of them are all in Malaysia. There are a few properties which I own under my own name including my own home. The commercial properties which I own are under company and I have another 1 or 2 shareholders as well.

I personally don't believe in zero downpayment properties, it simply means you don't have the capital to be in this game and you have no equity safety margin if the market moves against you. My leverage margins range from 90% to 60% depending on the property invested.

I am in no hurry to sell the properties as I bought them at pretty good values and they are already being rented or under construction. It's like buying dividend stocks. Just let the money keep on coming, no need to kill the Goose that lay the Golden Eggs :)

Calvin
http://www.investinpassiveincome.com

AK71 said...

Hi Wong,

I believe that Suntec REIT's distribution yield will reach 10% if it's unit price gets to $1 thereabouts. I could be interested again then. ;)

Gearing is pretty high and I am not too sanguine about office space rentals which Suntec has a big exposure to.

AK71 said...

Hi SMOL,

Took me a while to think through bronze stink. Haha.

Politics? That stinks worse than bronze!

As for being stubborn and succeeding, this is just the beginning. If my strategy continues to deliver through 2013 like I think it should, that will really prove something. ;)

AK71 said...

Hi Calvin,

Well, it is not everyday that we meet people who are invested in ten different properties, you know. ;)

So, 8 properties are in Malaysia and the two in Singapore are joint ownership. With 60 to 90% leverage thrown in, it makes you look more like any other guy now. For a while, I thought you were extremely loaded. ;)

I am wary about investing in real estate in Malaysia as my parents had a bad experience there. I think Singapore is exciting enough for me although the lower prices and possibly higher returns of Malaysian properties are enticing. Haha.

Thanks for taking the time to elaborate on your situation.

Anonymous said...

Regarding Malaysia property, my understanding is that the rental yield is low compared to Singapore property. A MYR150K-250K terrace fetch only around MYR300-600 rental per month, 2.4% to 2.88%? So unless buy and keep for capital gain, they won't be generating much passive income?

Did I miss out anything?

RL

AK71 said...

Hi RL,

That's very low. Where is this terrace house?

The condo my parents bought could generate a yield of about 4.5%, gross. That is apparently considered low or so a Malaysian friend told me. That's in the outskirts of K.L.

Anyway, I think any reader who is Malaysian or investing in Malaysian real estate would be able to answer your question better. Let's see if any is forthcoming. :)

financialray said...

Hi AK

Calvin certainly is not just any other guy. He may be over leveraged or he may be very rich or his parents may be very rich.

To have 8 properties in Malaysia and 2 condo in Singapore perhaps will need to have at least a million Sing dollars??

But I agree with you that I am also adverse to property investment in Malaysia.

I am not familiar with Malaysia but if I have several residential properties here in Singapore, I will be worried as an investor if the developers are already calling for the government to review their cooling measures.

My advice is to go for commercial properties. HDB does not sell shop houses any more and those they sold previously were all leasehold.

AK71 said...

Hi financialray,

I will not speculate on how much Calvin has invested in his 10 properties. It would depend on the specifications of the properties he bought and how much his co-owners and partners have contributed as well. ;)

At this current point in time, I would say that investing in undervalued industrial properties S-REITs is better than investing in industrial properties outright.

Why? Income stream diversification, buying below valuation, 10% distribution yield and gearing levels of below 40%.

If I were to buy an industrial property in Singapore now, I doubt I could get an offer with similar positives. ;)

Anonymous said...

Wa lau le u got SO lot $$$ for investing to get BIG div..

AK71 said...

Hi Anonymous,

Well, it didn't happen overnight. :)

Could you include your name or initials in future comments? Thanks.

Calvin said...

hi AK,

Yeah, I am just another guy working hard to make Passive Income work for me :)

I forgot to mention that I have also co-invested in a light industrial unit in Singapore. However, we are in the midst of selling it.

Light industrial units in Singapore can yield about 4-5% average, mine was yielding 6% rental yield as we bought at bargain price. Throw in 80% loan, which is basically a 5x leverage, your total rental yield on capital becomes 6% x 5 = 30%. Now, does that sound better than REITs which yield 10%? :P However, there are pros and cons most importantly of which rental is never guaranteed, you need to work to get a tenant.

Calvin
http://www.investinpassiveincome.com

Calvin Yeo said...

Anonymous,

If you are taking an average terrace or any other landed property in Malaysia or even Singapore, rental yield is bound to be low. However, capital appreciation can also be high if the property is well located.

Case in point for one of my houses which I bought in KL, the value almost doubled within 1.5 years and the rental yield based on purchase price is about 5%. Rental yield is nothing much to shout about, but capital appreciation is enormous.

My condos in KL generate a minimum of 6% yield, with my higest at close 8% yield. It depdends on unit type, location, how well furnished it is and so on.

My shoplots have also almost doubled in value from purchase about 2 years ago and expected rental yield is also about 6-7%.

I invest in Malaysian properties because I understand them. I wouldn't recommend anybody here investing in Malaysia unless you know the environment, laws and regulations, culture very well. Most Singaporean overpay for their properties in Malaysia, that's why they are all wary about investing in Msia :P

Calvin
http://www.investinpassiveincome.com

Musicwhiz said...

Wow, nice long thread of comments! Impressive!

Just to weigh in on property. Investing in real estate per se is a lot riskier than investing indirectly in property by purchasing shares of say a property development company or REITs. The leverage involved can be daunting and usually the case is that a person uses one property as collateral for another loan, thus if the market collapses this will provoke a chain reaction of negative equity and the house of cards would collapse.

My advice is that those who say they own XX properties must ensure they really own it clear and free (i.e. fully paid) and not by borrowing fro Paul to pay Peter. It may sound intelligent to rely on so much cheap debt and to make use of properties to build up your passive income stream; but the dangers of leverage should not be under-estimated.

Perhaps the amount of equity put into all XX properties is only barely equivalent to purchasing one choice quality property development free and clear. This, in essence, is what you should aim for, in order to sleep well at night.

Cheers,
Musicwhiz

Anonymous said...

Bravo. Well done AK! Thanks for the inspiring post. Remind me to work harder... Bk

AK71 said...

Hi Calvin,

Thanks for taking the time to share more with us. :)

6% x 5 yield at 80% leverage is a bit misleading as that is only possible if the loan you have taken has 0% interest. The NPI yield is probably lower but, of course, it could still be more than 10% per annum.

Also, we have to be concerned that there are many more risks associated with owning a single property at 80% leverage compared to owning some units in a REIT with 30-40% leverage which has a basket of properties.

So, comparing like for like, investing in industrial properties S-REITs is a less risky option. :)

AK71 said...

Hi Calvin,

The returns on your investments in Malaysian real estate is impressive.

Yes, I believe my parents overpaid for their condo in K.L. too. The Malaysian developers sharpen their knives when the have road shows in Singapore. :(

I guess you must be a Malaysian?

AK71 said...

Hi MW,

Indeed, leverage could be a double edged sword and the idea of good debt could be brought to extremes in certain cases. Too much of a good thing might not be good. ;)

Much also depends on a person's risk appetite, I suppose. Some can sleep better than others given the same set of circumstances. ;p

AK71 said...

Hi BK,

Thank you. :)

I am glad you find the blog post inspiring. Jia you. ;)

Anonymous said...

@Calvin

side track a little here. Did you ever considered the M-REITs ?

I only know that there is a 10% with-holding tax for non-resident. But if I trade from SG, the brokerage cost is killingly high.

I envy your properties in MY. Despite visiting there regularly, the mixed feeling i got was that the yield is terrible. Most of my local friends who had the 2nd property there usually need to top up or barely break even on the loan from the rental. Plus good tenants are hard to come by.

Dreaming of the possibility of staying in places like Malacca or Kluang or KK for my retirement. Someday...and soon too ^-^

SnOOpy168

grace said...

Hi AK

I am keen to invest in AIMs reits. What do I need to look out for? Thus far it's stable and I think it will not erode my capital much.

Please share your thoughts . Many thanks.
Bee

Anonymous said...

Hi AK

At what price did you get Aimsreit ?
Considering to put some cash in there for dividend yield too.
Overall, has your div yield outweigh the price fluctuation for some of the reits you own?

Hope u can share your thoughts with me.

Thx
Su

AK71 said...

Hi Bee,

What do you need to look out for? You might want to go to the right sidebar of my blog, look for "Investing in REITs and Business Trusts" and you will find many links to posts on AIMS AMP Capital Industrial REIT. ;)

AK71 said...

Hi Su,

Like Bee, you are interested in AIMS AMP Capital Industral REIT. So, my above reply to her would be useful to you too. ;)

From the time it was known as AIMS AMP Capital Industrial REIT, my first batch was bought in at 20.5c. It was two years ago, iirc.

Subsequently, there was a rights issue and I subscribed to my entitlement plus excess rights. Those units were at 15.5c.

I also bought more at 19.5c earlier this year. I bought again in the more recent sell down at 20c and 20.5c.

I did buy some at 21c, 21.5c and even 22c before. However, these units were mostly divested at 21.5c and 22c when I shifted funds to Sabana REIT to balance the two REITs in my portfolio not too long ago.

AIMS AMP Capital Industrial REIT has been a great investment for me both in terms of income and capital gains. :)

Calvin Yeo said...

Hi Musicwhiz,

I don't necessarily think that you have to own properties free and clear just to be safe in the property investment. One should definitely try to pay off the property which generates no income, which is obviously the house you stay in.

With regards to investment property, one of the greatest strength of investing in real property is the leverage from a property loan. How safe the investment is depends on 2 things. 1. Amount of leverage - Maximum 90%, if not ideally 70-80% for equity cushion.

2. How undervalued the property is. This is quite subjective. However, if you bought a property which is already 10-20% below market value compared to the peers around it, you should feel quite safe that the value will not dip much.

So basically, if you bought an undervalued property by doing some research and then apply a minimum of 10-30% downpayment, you should be sufficiently covered in terms of having to top up the loan in the case property devaluation. Next thing is to find the tenant :)

Calvin
http://www.investinpassiveincome.com

Calvin said...

AK,

I am a Singaporean, but I am staying in Malaysia now :P

Yeah, the 30% yield is a bit misleading, it refers to gross yield, but you get the point.

I am also invested in stocks and REITs as you can see in my posts. I believe in diversification of my investment assets. However, I expect all my assets to generate Passive Income for me, that's my basic criteria.

Calvin
http://www.investinpassiveincome.com

Calvin said...

Hi Snoopy168,

Yes, I am invested in M-REITs, but only Suntec REIT as of now. You can see my Malaysian stock portfolio here.

http://www.investinpassiveincome.com/my-malaysia-stock-portfolio-end-august-2011/

For me, I use my fiancee's account to invest, she's Malaysian :) For Singaporean, I think it still makes sense to maybe go to JB to open a local brokerage account with any of the banks. Then deposit some RM to start your trading. I think you will save a lot on exchange rates, trading commissions, custodian fees etc.

With regards to property investment, its ok be cash flow-neutral or even top up slightly if there's significant upside like a landed freehold property. However, if its a condo, your friends should seriously consider selling. The rental yield is too low.

Malacca properties are picking up, was in Malacca couple of months ago and almost bought a retail unit at Dataran Palahwan. However, I was not convinced of the long term potential and I took back my deposit. When the time comes to retire, just buy your Malacca condo with cash. Don't see the prices rising too high, besides the rental is even worse. Only buy rental properties in KL or Penang, no other places.

Calvin
http://www.investinpassiveincome.com

AK71 said...

Hi Calvin,

Yes, I suspect it must be gross yield which, to me, is not very meaningful. I look at NPI yield and when investing in REITs, I also look at distribution yields.

For example, Saizen REIT's properties have a gross yield of about 13% on average. Gearing is less than 30% now. So, is the yield 13% x 3?

Oh, you are a Singaporean. I know people who are doing the same thing as you.

I think they are all very brave to live in Malaysia, going by the accounts I have heard of high crime rate.

A friend in JB invited me to dinner once and I said only if it was in Singapore because I fear the crime rate in JB. He told me he is also afraid. Hahaha..

I have a good friend who tells me everytime he comes back to Singapore, he feels so proud of our country. When he goes back to Malaysia, he sees the difference.

The cost of living is lower there but there are sacrifices to be made, I suppose.

I am curious if your whole family is staying in Malaysia now or just you? So, are you a PR in Malaysia?

Musicwhiz said...

Hi Calvin,

I guess first and foremost I would like to apologize to AK71 for using this comments box as a place for this discussion on property. I understand it has been inundated by >100 comments as I write this and therefore it must be quite tiring to add one more, so I shall try to remain contrite as far as possible.

Calvin, I meant no disrespect when I rambled on about property and owning it free and clear. Being aware of the dangers of leverage and how it can cut both ways, I thought it fair warning to those (including yourself) who may be using such a method to multiply your returns. Perhaps I am too dusty and antiquated to fully appreciate the benefits of leverage and how it can be applied to scale up your wealth dramatically and quickly, but I never thought of taking any fortuitious route to wealth I guess. Slow and steady is my motto and using cash I already have is the way to go for me. It's a personal choice and I am simply describing my methods, and not forcing my beliefs on anyone else.

What you mentioned about leverage, undervalued properties in Malaysia and rental income can, of course, work if you execute it with care and sufficient knowledge. From what I can tell you seem a man who knows what you are doing, and it seems impressive that you can leverage to "own" so many properties. To me the beauty of leverage is that borrowed money can in effect create a multiplier effect and allow you to compound your wealth by tenanting out multiple properties and ensuring that the cash inflows cover your installment payments. In a low interest rate environment such as now, this would be the smart thing to do.

What I feel unomfortable with is not just the quantitiy of leverage employed to make such a plan workable, but also the collateral being put up to enjoy such benefits and the potential difficulty in finding and retaining a tenant of quality. Gross yield on tenancy usually averages 4-6%, and after maintenance and other fees it may come down to 3-4%; of course with leverage this yield is somewhat magnified, but it does not conceal the fact that a certain amount of effort must be expended in order to ensure one secures good cash flow, while at the same time also monitoring interest rates and property values to ensure one does not fall into negative equity. I guess the process is far too tedious for me, haha.

Just my 2-cents.

Musicwhiz

AK71 said...

Hi MW,

Hey, no problem. I enjoy reading different points of view, especially if they are well written and civil like yours. :)

I am not averse to leveraging conservatively. I believe leverage is a necessary evil.

I use loans as bridging facilities to grow my wealth and pay them down as rapidly as possible. This is, of course, against some gurus' teachings. ;p

So, in this respect, I am like you. :)

financialray said...

Don't worry AK/Calvin/Musicwhiz,

the 8 immortals all cross the ocean in different ways....there is nothing right or wrong, superior or inferior, etc as long as you are comfortable and know what you are doing when you plan your financial path

It is good sometimes to know what tricks other immortals have mastered and see if we wish to emulate or just stick to our own trade. As AK says, there is always a higher mountain where we may find the monkey king.LOL

AK71 said...

Hi financialray,

Indeed, there are so many ways to make money. We just have to set our own targets and use our own strategies to achieve them. :)

Anonymous said...

Hi AK

Thanks for the reply.

Primary reason for me to invest in Aims reits is because price seems very stable for the last 2 yr and I wanted something stable which will give dividend even if there is not much capital growth.

However, I also hear that sabana is a better choice. I noted that you also shifted your portfolio to sabana. Sabana prices seems to fluctuate much more compared to Aims. What's your thoughts? Is current price for sabana good for entr? If the dpri e dip again, then the dividend will
not be able to cover the loses even.

Su

AK71 said...

Hi Su,

Know your motivation for investing in something. If it is for income, fluctuations in price should not bother you if you know you have gotten a good deal.

Can a good deal get better? Why not? I bought an AIO PC from Lenovo not too long ago at a special offer price of $799. In less than two weeks, the price dropped another $100 to $699! This does not mean that $799 was not a good deal, right?

With Sabana REIT, the idea is the same. At 88c, we are looking at a distribution yield of 10% and its gearing is comfortable at 33% after all the recent proposed acquisitions.

If the price should fall further, the value is even greater. I would then buy more.

There is no guarantee that the unit price of AIMS AMP Capital Industrial REIT will continue to be so stable either.

Investing in S-REITs for income? Make sure they have strong numbers and get in at a good price.

If we manage to get in at the best price, often it is with a large dose of luck. :)

Calvin said...

AK,

For the Saizen REIT case, yes the gross yield will be approximately 13% x 3. However, there are a lot of expenses to take into account being a public listed trust. Listing fees, audit fees, management fees, interest expenses, captial expenditures, employee salaries and all takes the net yield down to very low.

As a private investor, you just have to deal with interest and taxes which are quite easily covered if you get a decent rental yield. Furthermore, even the capital appreciation is leveraged in the same ratio.

For me, I stay in KL. I wouldn't stay in JB, neither would I invest in JB. It's not safe and it will never be the same as the capital ciy of Malaysia KL. KL is different though, it's quite cosmopolitan. I stay here with my soon to be wife. My other family members are all staying in Singapore, I still have not considered about applying for PR. In the end, I will probably still head back to Singapore anyway.

MusicWhiz, you are right about the risks, high capital requirements and work required to invest in property. However, if done right, it can supercharge your investment returns. However, I also keep a close eye on my personal leverage and I try not let it shoot over 60%these days. When I first started investing, my personal leverage is about 80%. But now that I have achieved some success, I am less gungho and try to take less risks.

Calvin
http://www.investinpassiveincome.com

AK71 said...

Hi Calvin,

Yes, I do realise the differences between investing directly in properties and through a trust.

I said what I said about Saizen REIT only to point out that it is more meaningful to look at NPI yield instead of gross yield. Nothing more. ;)

As for leveraging, I am familiar with its benefits and how it could amplify returns.

However, personal experience at a young age has built into me an aversion to leveraging and I would only use it grudgingly.

I am now probably more concerned with preserving my wealth instead of growing it more aggressively. :)

Anonymous said...

Thanks for your reply AK.

May I know the percentage breakdown of your reits investment portfolio now :-) ?

Su

AK71 said...

Hi Su,

I am not sure of the exact breakdown. ;)

Very roughly, AIMS and Sabana account for about two thirds of my investments in S-REITs.

Other bigger investments are First and LMIR, the current LippoMalls. Saizen is still quite significant but it would take fifth position.

Anonymous said...

Hi AK

Do you have the Dividend payout dates for AIMS?

thanks
Su

AK71 said...

Hi Su,

AIMS AMP Capital Industrial REIT's income distributions happen quarterly in the months of March, June, September and December.

Anonymous said...

That's great and congrats. Three quarters into the year and you've collected $75k. So by end of the year should be $100k.

It's a challenging year though, where capital depreciation outstrip the dividend gain and net worth getting lower (at least for me) ;)

Busta

AK71 said...

Hi Busta,

The REITs I am vested in have been holding up relatively well amidst the selling.

I see my investments in AIMS AMP Capital Industrial REIT, Sabana REIT, First REIT, LMIR (LippoMalls), Saizen REIT and Cache Logistics Trust holding their value nicely.

If not for my more recent badly timed purchases of shares in Capitaland, CapitaMalls Asia and NOL, my portfolio would be almost sterling.

Thanks for the well wishes. :)

Ah John said...

As I look at GLP financial report, the profit is after asset re-valuation, and due to property price volatility, the profit changes dramatically.

The questions are:
1) Does it make sense to count asset revaluation into profit?
2) If so, does the firm give out dividend according to profit or something else? Because if it's according to profit, then it's quite risky.
3) Other REITs follow this practice?

Expect your views ...

AK71 said...

Hi Ah John,

I am not vested in GLP but I do know that it is not a REIT and, so, we should not look at it in that light.

These days, I don't look at a counter unless I am vested or have some kind of interest in it. I tend not to wander outside my circle of competence now. So, I won't be doing any FA on GLP. ;)

Anonymous said...

Motley: I always wanted to ask if you could reflect on this thought ? after you reach your passive income goal and the next greater goal ...

when would you say, time to quit your job ... and enjoy your fruits, would you have the "courage" to do so? after all we are trading time with money and our lifetime is finite.

AK71 said...

Hi Motley,

Yes, we only have so many years in this world. Some of us have more than others.

Frankly, I would like to stop working now. I am a low maintenance kind of guy and I don't need very much for myself.

However, I am worried about my parents and whether I would have enough to take care of them in future. So, a higher level of passive income would be good.

How much is enough? I don't really know.

I do think a nice time to retire would be at 45 years of age. Still mobile and energetic enough to do all the things I have always wanted to do and spend more quality time with my folks too.

Let's hope I stay healthy enough to continue blogging my adventures in life for the next few years. ;)

JJ said...

Hi AK,

Been a long time, and the first reaction when I read this post was, this guy is definitely going to get lots of comments, and it did! :).

Though some has snobbishly question your achievement due to the size of your capital,.. I would say, do whatever you are comfortable with!. For the love of God, some even put a few dollars and earn big bucks through 4D, toto, IR, etc, if they want/can, let them :)

Anyway, congrats for your achievement!!. Good for you.. and keep the posts coming, it is really nutritious for thought.

AK71 said...

Hi JJ,

Long time? I thought we just had a "chat" in my other blog on gold and the US$. ;)

Thanks for the encouragement and I will continue to share my little big ideas here. :)

Anonymous said...

Just exchange of ideas .

If one has 1 million SGD, why not
invest in OCBC preference shares with dividend of 5.1% annually

that is about 51000 SGD p.a. passive income

The risk is lower unless OCBC go bust and can also enjoy more quality time without need to monitor it

AK71 said...

Hi Anonymous,

At the current price, I don't think it is 5.1% dividend anymore, is it?

Having said this, anyone investing for income could consider preference shares issued by our banks here.

Personally, I had DBS NCPS 6% for 10 years and got back my principal this year.

I am waiting to get some bank preference shares if their prices should fall below par. ;)

Anonymous said...

Hi AK

Do u mind if I ask whether you are married and have kids? I personally have 2 kids and I find the children-related expenses very high.

Busta

AK71 said...

Hi Busta,

I have lost count of the number of people who have asked me that question. ;)

My answer: I am not married but I do not know if I have any kids. ;p

I have calculated how much each kid would cost from birth to the time of graduation from NUS or NTU. It is a whopping S$250k! So, yes, kids are expensive.

Anonymous said...

Hi AK
What do umthink of Cambridge trust?
Comparing to sabana and Aims?

Thanks
Su

AK71 said...

Hi Su,

My views on the CEO of Cambridge Industrial Trust (CIT) is quite well known to regular readers of my blog. You might be interested in the following posts:

Cambridge Industrial Trust: 2Q 2011 results.

Cambridge Industrial Trust: 1Q 2011 results.

I still own some units in CIT but I will not be increasing my investment in the Trust anytime soon.

bummy said...

Hi AK,

I have not read your posting nor any of the 133 comments, nevertheless a very big congrat's on exceeding your targetted dividends.

you have done extremely well and this serves as a motivation for me to try even harder. :)

many thanks for sharing and i have confidence you hit your year end target.

cheers
bummy

AK71 said...

Hi bummy,

You mean my year end target for 2012? ;)

You are doing well in your own investments too. So, please, no more praises. I fear my head might swell. ;p

Thanks and good luck to us both.

SnOOpy168 said...

AK


Noted my payment charts since last year, when I started playing shares (and it is 90% REITs), that there months where no payments are received.

I did remember that some REITs are quarterly and some like Saizen who payment is rather not noticed.

Do you mind sharing a simple monthly table, if you have just S$12 dividends per year, which months & how much of this S$12 are they paid in the year?

Thanks in advance, hopes helps me to understand my own notes better

AK71 said...

Hi SnOOpy168,

I don't really track the way you think I might. ;)

I know some REITs pay quarterly and some pay half yearly. As long as the money comes in, I'm happy. :)

selespeed said...

to do a 50k annual income, you will need a lot of capital to do that. why not use property rental? with leverage, you can achieve similar results using lower capital.

the key is to buy a good rental property in a good location.

AK71 said...

Hi selespeed,

There are many ways to create passive income. Indeed, using leverage, investing in property and renting them out is one way.

In fact, one could also use leverage to invest in equities to magnify the benefits, be it capital gains or dividends received.

However, leverage is a two edged sword and I use it sparingly.

We should also remember that property investment is riskier if one has limited capital for only a 20% to 30% downpayment. If that investment goes awry, there is nothing to fall back on.

Investing in a basket of equities with the same capital would reduce risk through diversification.

Ultimately, it is a personal choice. :)

selespeed said...

AK,

sure! everything involves risks. risk in stock reits and risk in properties. the greatest benefit in properties is rising price. for reits, i am not so sure of the price increase.

AK71 said...

Hi selespeed,

I won't say that the greatest benefit of property investment is rising price. It gives the impression that property prices only go up. ;)

I have known people who have lost money in properties too.

People who bought private properties before the Asian Financial Crisis would have just broken even recently.

People who bought REITs in the last crisis (for examples, First REIT at 30+c, LMIR at 18c, Suntec REIT at 50c) would have done much better.

So, depending on when we pull out the data, we could paint equally rosy or dismal pictures.

Invest in properties or in equities, know the risks, get in at a bargain and we will do well. I have done both. :)

SnOOpy168 said...

AK

With your recent target exceeded.
Perhaps this time next year, you will be blogging from a seaside resort with the title - "S$180k passive income. " Then I will have so kick myself for more catch up work. Hehehe.

Yesterday I had updated my unit cost, after dividends. Seems that I am not doing too well, with some counters in the red. The price down is costed more than a year's yield. A few counters, I had mentally written off liao. Buay song (again) & need to pay some school fees lor.

Div Yield on this year's total investment mkt value is about 5.5%. Better than nothing previously and helps to fund some home expenses & reinvestments.

My plans for next year ? Focus on a few counters and top up on weakness. Chey, sounded like expert but am not. Still need to discipline myself read up more and not to "buy something" when there is cash available.

Thanks for the blogs AK. See ya next year

Huat ah...

AK71 said...

Hi SnOOpy168,

Yes, depending on your entry prices, you might experience paper loss or gain because prices will always fluctuate.

If you are invested in income generating counters with good fundamentals, look out for opportunities to add on weakness.

All in good time. :)

KT said...

Hi AK and others,

I was thinking of having a passive income strategy through using mainly REITs and this is how I chance upon this site.

Based on my portfolio of REITs, shares and Bonds, the expected yield is about 6.3%, generating about $12k per year, or about $1k per month on average.

Currently, I am also trading option as a side line, and my trading income from my option as of last month is now equal to my fulltime job.

I am having this thought for the past few days, that is, should I take money out from my option trading and put into the REIT portfolio to earn passive income? or should I levave my money in my option trading to continue to grow the option income. My option income return is about 3% per month.

From a pure dollars perspective, it is a no brainer to continue to leave my money in the option trading as it earns a much higher retur, but the risk is much hgher as well.

Any thought?

AK71 said...

Hi KT,

I know nothing about options. So, I can't comment on them.

There are many ways to make money in the stock market. As long as you know what you are doing and are comfortable, why not? :)

Roads to wealth creation in the stock market.

Anonymous said...

haha u can get over $120,000 on dividends? so for 1 lot about $100 dividends u have over 1200 lots of shares ... did u calculate the lost of market price of the shares which u bought long ago but the price crash lower and that if u sell on todays current market u would lose $$$. haha very funny dude!

AK71 said...

Hi Anonymous,

I invest when I see value. Price could fall lower and a stock could become a more compelling buy. Then, I would buy more. In the meantime, I would collect dividends in a weak market.

If anyone doing what I do has to sell in today's market for whatever reason and presumably lose $$$ in the process, then, he is probably using money he can ill afford to invest with. ;)

Understand our motivations and act accordingly.

For someone with a trader's mentality, he would probably say I am a "funny dude". This also presupposes that I would lose money if I should liquidate all my investments in REITs. You would have to know all my entry prices to know if this assumption is correct. ;)

Anyway, it is definitely a matter of perspective and I shan't reveal more.

selespeed said...

don't be to ocarried away by 120k dividends. what is telling here is the positive part. an investor can be hanging on to losses on stock just so to collect dividends.

of course, it is possible to add on "weakness: of stocks. but at the same time, investor can also be licking losses just to hang on to them.

so, we have to see the real avarage price of owning the stocks. who knows the dividend so collected is far less than losses of the stocks? this is not revealed.

finally, to receive 120k in dividends, you have to own a lot of shares value. working backwards, millions of dollars.

~2 millions of stocks -> 120k of dividends @6%. 10% loss of stocks is like losing 100k just to keep 120k in dividens. is it wise? the argument here is you can keep adding. of course, but it can also go down and you add more.

the dividend is only attractive if the stock price is steady. but if it comes down, it is not

AK71 said...

Hi Selespeed,

Any argument is as good as the assumptions being made.

If we assume that stock prices would never recover, then, your argument would make sense.

I have been through many stock market crashes before and in each crash, buying more shares of fundamentally strong stocks which pay good dividends has been a good strategy to use.

The rich always emerge from a bear market richer. You would notice that they use stock market crashes to accumulate.

I have no doubt that they receive more in dividends year after year. :)

selespeed said...

i am not doubting this...

but as an experienced investor myself playing since 2003 actively, i also knew of foolish adds of so called market weakness., or so called averaging down. you coluld be adding all the way down just so to collect dividends.

anyway, i have also been to market crashes and cycles and i do think it is not a sure thing this way.

you're assuming you won't want to sell no matter what. in the end, when it comes to a fast down turns, you will add more. it's like everyone following you will make gains and the "rich" will never make losses. this, i am afraid, i will not buy.

of course, what you are saying to add during a down turn is true. and it rises to the levels you initially bought. and if it does not, you are actually losing money. but it is also true, however much you add, the average price could also be lower than what you paid and so collected via dividend.

AK71 said...

Hi selespeed,

Thanks for the follow up comment.

I have something to say with regards to the following:

"you're assuming you won't want to sell no matter what. in the end, when it comes to a fast down turns, you will add more. it's like everyone following you will make gains and the "rich" will never make losses. this, i am afraid, i will not buy."


Regular readers know that I would sell for reasons both technical and fundamental. Technically, I could trade for profit at resistance. Fundamentally, I could sell if the story has become a nightmare. I would even trade REITs for a profit. ;)

I do not think that people who follow me would become rich or if they were rich, they would not make losses.

I am investing for income and look for steady and relatively high dividend payouts. If people are after the same thing, this could work for them. If they are hoping to get rich doing what I do, they could be disappointed.

As for the rich making losses, I am sure almost every investor would make losses in a bear market. The difference is whether they are able to stomach the losses.

A fellow blogger, OT83, penned a tongue in cheek blog post and you might be interested to see it here:
Kung Fu and Inner Strength.

selespeed said...

AK71;

"Regular readers know that I would sell for reasons both technical and fundamental. Technically, I could trade for profit at resistance. Fundamentally, I could sell if the story has become a nightmare. I would even trade REITs for a profit. ;)

I do not think that people who follow me would become rich or if they were rich, they would not make losses.

I am investing for income and look for steady and relatively high dividend payouts. If people are after the same thing, this could work for them. If they are hoping to get rich doing what I do, they could be disappointed.
"

now, we're getting a clearer picture here. even for dividends, it is wise to sell and buy later.

AK71 said...

Hi selespeed,

I would not say whether it is wise or not since there is no guarantee that selling would allow us to buy again at a lower price later on.

I do not, however, believe in being overly bearish or bullish. I believe in being pragmatic and, hence, my current strategy in the stock market.

The Singaporean Engineer said...

Hi Ak, just want to say that you have truly inspired me since I started on my own passive income building journey in 2009.

In the year 2012 I have received dividend payout of $15730 from REITS and will work harder to achieve my goal of $20000 for year 2013.

What I want to say is that the advice you have given here has provided guidance for an average Singaporean like me to achieve some form of passive income without having to go to MLM or to fork out a fortune to buy property for rental yield and I sincerely thank you for that.

AK71 said...

Hi TSE,

Coincidentally, I started blogging in 2009, the year your journey started. :)

The last 3 years have been good ones for REITs. However, you have to look harder these days and question if there is still good value to be found at current prices.

Congratulations on your 2012 passive income of $15,730 from S-REITs. That is about $1,310 per month which I guess is more than enough to cover personal expenses. This means you are able to save more of your earned income.

I am truly happy for you. :)

 
 
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