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Achieving $1m in retirement funds: Epilogue.

Sunday, January 13, 2013

This is the final blog post which should be read together with the two I wrote this weekend to encourage young people to save and to invest in the stock market.

The aim of  "Retiring a millionaire is not a dream!" is to shake all negativity from the mindsets of the young who think that it is impossible for them to have S$1 million in cash (without counting the money in their CPF or selling their HDB flats) when they retire at age 65 in the distant future.



With the help of numbers provided by The Business Times, the companion blog post "What is S$1 million dollars at retirement? Peanuts?" aims to demonstrate how $1 million is enough for retirement expenses, given certain assumptions.

In this final blog post which would complete the trilogy of blogs, I am going to tell you that there is no need to constantly invest to achieve a 5% annual return on your investments. Then, why did I bother to say that in the first instance?

Simply because it was the easiest way to illustrate how being disciplined savers who invest our savings, we could make reality out of a dream.


You know what is the best way to make money from the stock market?

It is to buy at the depths of a bear market when even the best blue chips are bombed out. During the GFC, I bought many more units of First REIT at 42c and LMIR at 18.5c. During the deep correction at the end of 2011, I bought more AIMS AMP Capital Industrial REIT at 95c. There are many such examples.

However, without any money put aside, there is no way we would be able to take advantage of opportunities to buy on the cheap!

Indeed, we might not even have to wait for a bear market to buy bombed out stocks as mispricing by Mr. Market could happen anytime and my large purchase of units of Saizen REIT at under 13c per unit middle of last year is a good example.

So, once we have savings put aside for investment, we should hedge by investing some of it but we should not invest all of it because we must always have a war chest ready to take advantage of any mispricings by Mr. Market.

We want to buy low and sell high. This means to sell stocks which are overvalued and to buy stocks which are undervalued. The former usually takes place in times of great optimism while the latter usually happens in times of great pessimism. Doing this will make us quite a bit of money from the market. Add to this our monthly savings and any dividends received, we would do quite well.

Making financial projections with average rates of return is all fine and good in theory but, in practice, making money from the stock market requires a little more diligence on our part but it is definitely not rocket science.

With this, we end this weekend's trilogy of blog posts which hopefully have demonstrated to the 25 year old reader whose email started all of this that his scepticism could be put to rest. The ball is now in his court.

Related posts:
1. Retiring a millionaire is not a dream.
2. What is S$1 million at retirement? Peanuts?

12 comments:

EC said...

Hi AK,

Wow it's become a trilogy! Thanks a lot for the three-part post, it's certainly been very helpful. I'm slightly older than 25 so it applies to me as well - actually to anyone too. I'll look closer into it to get some inspiration!

Best wishes,
Eugene

AK71 said...

Hi Eugene,

You can tell I am a fan of "Lord of the Rings" then. Hahaha.. ;p

Only slightly older than 25? Really? Your past comments gave me the impression that you were older. Hmmm.. I wonder why.

Good, you definitely have time on your side. :)

EC said...

Hi AK,

Haha! I guess I act older than my actual age, well the difference was more stark when I was younger.

I think I mature earlier than some of my peers - don't know whether that's a good thing lol. But it's interesting to know that you thought I was older - can the comments really hint the commenter's age haha?

Best wishes,
Eugene

AK71 said...

Hi Eugene,

It is definitely true that some people grow up faster than others. I think it is a good thing but that's just my view. :)

The way a person talks and writes, not just what he talks and writes about, is very revealing. ;)

EY said...

Hi AK,

Incidentally, I saw an article this morning on Yahoo USA talking about compounding interest and starting young. Sings the same tune! :D

http://finance.yahoo.com/news/investing-money-plus-lots-time-154751502.html

And you say you can guess how old somebody is by studying his writing nuances? Oh, did you guess I'm around 18? Or when my 'zen-ness' showed, did it cross your mind that I'm 60? Hahahaha!

On a different topic, I'm amazed that you use mosturisers! Puts me to shame. I only started applying skin care products and moisturiser on my face when I hit 35! Hand and feet moisturiser? Too lazy to use them still. :P But you have given me a nudge to start. How can lose out to a guy, rite? LOL~

Endrene

AK71 said...

Hi Endrene,

Thanks for sharing the link. :)

There is a formal branch of study in English Language which looks at writing style. Those scholars are more proficient than I am, for sure. I only passed an undergraduate module in the subject, after all. ;)

I am amazed that ladies are amazed that guys use moisturisers. ;p

Even my dad became a firm believer in getting a good moisturiser with SPF 15 after he got a job that required him to spend a lot of time under the sun. It does not only prevent burns, it lowers the chances of skin cancer.

For me, it is the constant paper cuts that got to me. In recent years, skin around my finger nails, skin on my elbows and skin on my feet became very dry. Hangnails! Urgh! Moisturisers are a practical solution. :)

SnOOpy168 said...

seems that your story had generated some reactions in the biosphere, with "million dollar" tag appearing in the headlines. heheheh

Just read someone bragging about million $ "isn't necessary but judging our needs and then achieving financial freedom" or that don't believe in such hocus pocus "pouring cold water" on compounding interest/returns. Plus a few others in similar terms. I think they all missed the point here and that some are just writing to keep themselves occupied as there are often no substance in their post.

While the actual needs of the streaming income varies, the million $ is a good yard stick. Someone wrote that $300k would be enough, why chase after $1m ? @$3k a month draw down, the 300k will last just short of 9 years. Then what ? Depend on your children ? Oh, if you had kids, then you sure you have that $300k to begin with when you retire? Not forgetting inflation etc etc.

Perhaps these blokes would see that the goal is set @ S$1m but the essence is in the path reaching there. No course charted is fixed & inflexible. i.e. if yield compression makes REITs unattractive, then look at other sturdy companies with good dividends payout & yield. Have to make course adjustment along the way, e.g. even went we walk or drive.

Like Star Wars, perhaps we have several episode before and after that are not revealed yet ?

AK71 said...

Hi SnOOpy168,

The blogosphere is a place of freedom which means there are no filters. So, there are plenty of opinions around on any one topic. Personal finance and investment topics are no exception.

When I was planning to write a reply to the 25 year old reader, I thought it would benefit many more if I were to write a blog post instead of just writing an email to one reader.

Of course, that one blog post morphed into a trilogy which is probably more digestable in its separate parts and has more impact. At least, I think so.

Unfortunately, once again, my writing has invited some sneers and jeers from some in blogosphere, including eminent bloggers.

I agree with you that there are no sacred cows and I have said in my blog before that I was not always big on S-REITs. I have also cautioned that there could be a time when people could lose money in S-REITs. The only constant in life is change. :)

Your choice of "Star Wars" as a description, whether you know it or not, is ironical and has more inferences than one. I have never liked wars on any level.

SnOOpy168 said...

before i kicked the other blogs into the bins, their POV are most welcome as there are always 2 sides of the coins and always good to hear them. It is up to us to select which would make more sense and are are applicable to one's situation.

Star Wars ? Not the war but the series of movies. They had 3 episode, then added new stories to show "the beginning". 007's Skyfall & the newer star trek movies, hovers around these path.

AK71 said...

Hi SnOOpy168,

Hahahaha... Yes, I know "Star Wars". I watched the first movie when I was in primary 3, I think.

I was indulging in a big of word play. That's why I said it was "ironical". Haha.. Thanks for brightening my day. :)

Matthew Seah said...

HI AK,

25years old....

me?

SGYoungInvestment?

AK71 said...

Hi Matthew,

I don't think you need to seek advice from anyone on money matters. You are definitely way ahead of the curve for someone your age. ;p

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