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Retiring a millionaire is not a dream!

Saturday, January 12, 2013

I recently received an email from a reader in his mid 20s who just joined the workforce. Reading my blog at the recommendation of a friend, he wrote that he felt encouraged and sceptical at the same time. He wondered if it is really possible for him to become a millionaire (without having to sell his future flat) when he finally retires. Do you feel the same way he feels?


The sooner we start, the better.

With the increasingly high costs of living in Singapore, it is easy to think that it is no longer possible to retire wealthy and having a million dollars in liquid assets seems to be a popular yardstick. I have a feeling that this belief is widespread amongst the young and, perhaps, the slightly less young too. This belief is very dangerous! It could be a self fulfilling prophecy!

Hey! Young people out there, listen up! You can become a millionaire by the time you reach retirement age or earlier! What's more, this is possible without even counting the money in your CPF or the value of your flat! AK is not pulling your leg. It is true.

I don't know how much money you make a month. I don't know how much money you spend a month. Of course, you know that I would say you should increase your income and reduce your expenses as the first step to wealth building. You already know that.

I won't tell you how much money you should spend a month. How could I tell you? Everyone's circumstances are different.


What I can tell you is how much money you should at least save a month! Now, based on this and with the knowlege of how much money you are spending every month, you would know how much money you must make a month to achieve the target of having a million dollars in liquid assets by the time you reach retirement age.

Young people have the most valuable asset in the world and that is time! Young people have time on their side.

The younger we start saving and investing for our retirement, the easier it is going to be. I know we hear this all the time from insurance salespeople and often, we brush them off because we believe that they are just out to make money from us. Well, AK is not an insurance agent and I am not going to make money from you listening to me. So, don't brush me off.

So, listen, what the insurance salespeople say is true. Yes, it is.



Now, let's work our calculators!

How much should we be saving and investing every month if we would like to have a million dollars in liquid assets by the age of 65?

Taking the example of the 25 year old reader who wrote to me, S$650, give or take a few dollars. Yes, only S$650 a month! Accumulate savings, buy stocks of good companies with about 5% dividend yield a year and re-invest the dividends. Saying nothing of possible capital gains, voila, you would have $1,000,000 by age 65!

The power of compounding is amazing and I have blogged about how money in our CPF-SA will grow 50% every 10 years even if we were to stop contributions today and this is from an annual interest of 4%!

What about the not so young? Well, if we start at age 30, we would need to put aside about S$880 a month. Not so bad. What about age 35? Ah, S$1,200 a month. Still manageable. Then, age 40? Hmmmm... S$1,680 a month. Later at age 45? S$2,430 a month! Wah! Sorry, I shouldn't shout.

OK, don't ask me for the monthly amounts for age 46 and above. I am in cold sweat.


Now, when I blogged about my passive income from S-REITs, I said that it is always hardest at the start. The Chinese say 凡事起头难. Hard to start but start we must.

To the 25 year old reader, believe me when I say that if you keep at it, your annual investment gains will eventually exceed the annual sum that you are saving and investing. Yes, your annual investment gains will exceed S$7,800 at some point in time and it will continue to grow if you continue to do the right thing.

Now, pause and picture that. Are you smiling?

If you know anyone who feels the same way this 25 year old felt, tell them that AK will shake them hard by the shoulders. Nah, let's not be violent. Just tell them to read this blog post. It won't take too much time but it could change someone's life.

Remember, all of us can do it!

Related posts:
1. 7 steps to passive income from stocks.
2. If we are not rich, don't act rich.
3. Warren Buffet, the world's greatest money maker
4. Rich Dad, Poor Dad: 2 are better than 1.
5. Recommended books for FA and TA.
6. 7 money habits of AK71's.
7. What is $1 million at retirement?
8. Achieving $1 million in retirement funds.

62 comments:

Cory said...

I think inflation itself will easily propel most youngsters today to Millionaire before they retire.

White Concepts said...

Just wanted to add a few remarks to the view to give a bit reality of the amount when we are facing retirement. Inflation with each percentage point can have a great impact to the amount one can really spend before depleting the million dollar savings.
Just a reminder to all that million dollar in today terms is within our reach when we retire but buying power with this amount change dramatically with inflation inclusive.

AK71 said...

Hi Cory,

You think so? That is unconventional thinking as many would think that inflation would mean higher expenses for all and make wealth growing even harder. However, I can see where you are coming from.

We could bank on our homes becoming higher in value by the time we retire, can't we?

However, this blog post is about how younger workers could build $1m by age 65 just by setting aside a small amount of money every month without any need to monetise their homes or take CPF savings into consideration. :)

AK71 said...

Hi White Concepts,

Yes, you are absolutely right. This blog post did not take present value of money into consideration.

The purpose of this blog post is to demonstrate to readers that it is possible to grow our wealth significantly through discipline and that younger people have the advantage of time. It is meant to pull people away from thinking that there is no hope and, thus, they do not even bother trying. :)

Kim said...

Hi AK
Understand that you have train your very very young niece to be financial savvy so that she can fund her future education from the dividend collected. Can share how u go abt doing it, how much must be invested monthly etc etc...
we want to learn also :)
Thanks

yeh said...

Very good writing. Me and my hubby both started working 10 yr ago, we able to accumulate Abt 500k cash in bank now. Me 30 years old and my hubby 31 years old. Although we are still serving HDB loan 300k. But I believe we are able to retire @45 or even earlier.

Singapore Man of Leisure said...

Let me join in the cheerleading!

Nobody knows what 30 years later would look like.

Yes, there will be inflation. And the buying power of $1 million will not be the same as today. That we are certain.

Perhaps it's easier if we use live examples as not everyone can dream. Some already start pouring cold water on themselves when there's a mere spark of inspiration ;)

Just look at your parents (and other older relatives).

Ask them what they did (or did not do) 30 years ago.

30 years ago in 1982 - $1 million can buy landed property.

So fast forward 30 years later to today. Yes, $1 million today cannot buy landed property.

Which would you prefer?

To have that $1 million today despite the inflation and diminished buying power or have not started the journey at all?

After 30 years in 2012, have zero financial planning experience to speak of? And no that $1 million?

Youth! Your asset is not only time.

It's you don't know what CANNNOT be done!

I know it's counter-intuitive. Do first then figure out later.

Once you have been spoilt by working experience, if not careful, we'll join the masses in NATO...

That first step is the hardest...

Cheers!

AK71 said...

Hi Kim,

You must be referring to this blog post here: At what age to start investing in the stock market?

As and when I have a chance, I would show my niece ways of saving money. For example, why is it important to compare prices and how to buy similar for less.

I also explain to her why it makes sense to invest in companies like SPH instead of leaving her savings in a bank account. She understands inflation and what it does. :)

What she has invested in SPH will not be able to fund her future education in full but it will go some way to defray the cost, I am sure.

We live in a country where we have to be financially savvy. Some people told me I am making my niece money minded but as long as our hearts are in the right place, it is better to be savvy in money issues in Singapore than not.

I donate to a list of charities in Singapore regularly. So does her mother. My niece knows the importance of helping the less fortunate. However, I have also cautioned her to be careful of fraud.

Teach them young and do it slowly. Don't give them nightmares. :)

AK71 said...

Hi yeh,

Early retirement at age 45 is a very nice goal to have. That is my goal too. :)

Calculate how much both of you would need on a monthly basis when you retire in 15 years' time. Take into consideration annual inflation of at least 3% and build in a buffer for a peace of mind. Make sure you have enough resources to last till at least age 85.

More or less, you are set then. ;)

AK71 said...

Hi SMOL,

Indeed, the first step is always the hardest.

I am sure all 25 year olds who have read your comment would feel that it is better to have the $1m 40 years later than not to have it. This is although its purchasing power would probably not be the same as what it is today.

You have put it across so well. Thank you. :)

yeh said...

Hi AK,
Tell u frankly, both me n my hubby are Malaysian. We have 2 house in Malaysia also, one in my hubby hometown, another in my hometown.
Initially I plan to keep my HDB for rental when I retire. Now I just think when I reach 45. I just sell off everything and back hometown.
What I have that moment, will be more than enough.) I hope.

jojo said...

Hi AK,
You mentioned re-investing dividends for the compounding effect of multiplying the returns.
Most US companies have dividend reinvestment plans (DRIPs), which encourages retail investors' participation.
However, I am not aware of any such plans provided by STI-listed companies. Also, being able to buy only 1000-multiple lots in STI stocks, how does one reinvest dividends of STI stocks? Thanks.

AK71 said...

Hi yeh,

Ah, I see. Malaysia is really spoiling the market. Hahaha... ;p

I know quite few people who are moving over to stay in J.B. when their apartments or houses are completed there.

AK71 said...

Hi jojo,

I know some S-REITs offer dividend reinvestment plans. ;)

Anyway, I usually do not participate in these because I like to buy stocks when I feel there is better value. So, re-investment to me is to buy more when prices are more favourable to buyers instead of sellers. :)

Kyran Tan said...

Hmm reinvesting dividends.. I am considering signing up for a share builder from Phillips. Anyone knows whether the odd lots from there get paid dividends as well to enjoy the compounding effects?

hjteo said...

Hi Kyran,
While I don't have Philips SBP, I bought odd lots using Philips and there is dividends and rights from there.
In Philips SBP FAQ page, it mentioned that dividend and rights/capitalisation will be calculated/allocated for reinvestment.

Link here http://www.poems.com.sg/index.php?option=com_content&view=category&layout=blog&id=145&Itemid=126&lang=en#37

Serendib said...

Hi Kryan, I've been investing thru Philips SBP since 2008. say you own 571 shares of SPH on the dividend ex-date, then SBP will credit the dividend for all 571 shares to your SBP account (which you can reinvest if you wish). SBP does charge a fee of 1% of dividend amount though.

Kyran Tan said...

Thanks guys! Really helpful info there :)

Ronaldo Cristi said...

How did you come up with 1 million after 40 years with only saving/investing $650 a month? I calculated with re-investing all dividends and I only got to $80,000 after 40 years say if someone started at 25.

Do you mind elaborating more on the calculations? I have the assumption simply $650 put aside each month completely for investment, ignoring any other savings.

AK71 said...

Hi Ronaldo,

$650 x 12 = $7,800 a year.

$7,800 x 40 = $312,000 a year.

This is purely savings alone. Hmmm, I think you might want to try again? :)

Sanye ◎ 三页 said...

Arh, why hasn't someone blogged about this when I was 25!

Poor uncle here could only start my investment journey at 40+. Its soooooo unfair!

By the way, and jokes aside, it does take some discipline to put S$650 aside every month. I know some youngsters who earn around 3K but are not able to save %300 a month.

Kyran Tan said...

I have looked into compound interest before, and whether your investment compounds monthly or annually do make a difference too! Try to find something that compounds monthly ;)

AK71 said...

Hi Sanye,

Did blogs exist when you were 25? I know when I was 25, email was a novelty. ;p

When I first entered the workforce, I was 25 and had a gross salary of $3,000 a month.

I would take $300 out every month as money for discretionary spending. Then, taking away money for insurance premiums and other fixed expenses, I would be left with $1,000 to $1,200 which I saved.

I didn't practise "pay myself first" which I see widely advocated in blogs. ;p

AK71 said...

Hi Kyran,

Please share with us any discovery. Thank you. ;)

havefund said...

is your website hacked? there are many pages of some language...

AK71 said...

Hi havefund,

Hacked? Really? I hope not. I can't see the pages of strange language on my computer screen though.

Anyone else has this problem?

I am an IT idiot. Oh dear. :(

Mel Sg said...

You're perfectly right, I miscalculated in terms of years instead of months, my bad. If you wish to have the excel sheet where you can simply change the amount of investment and %, do drop me an email. (:

It's amazing how the numbers can change so easily with a slight increase in investing $800 instead of $600 and expecting 6.5% dividends instead of 5%, we are looking at almost 2 million dollars instead of just 1 million after 40 years, provided we start at 25.

Great motivation!

AK71 said...

Hi Mel Sg,

I am a dinosaur and do mostly everything with pen and paper. I do appreciate your offer of the excel sheet though. I hope you can make it available to any reader who might be interested too. ;)

Allow me to motivate you further. Saving more is always better. Then, if we are able to invest in the depths of a bear market, expect the results to be even more eye popping over time.

Start young. If we are no longer young, well, start now! :)

Kyran Tan said...

Hi AK, well personally I am gonna open a share builders account and put some $ every mth into my cpf special account in a disciplined manner. This will be for my long term planning. You may ask why bother with the share builders account and why not all into my cpf special account for a 'risk-free' compounded return since it is long term. Because I am not sure whether there would be any revisions to the cpf withdrawal policies 30 years down the road ;p

AK71 said...

Hi Kyran,

I won't ask what you think I would ask. ;)

We are all different in so many ways. In this instance, you have a consideration which I don't.

CPF money, for me, is primarily a fail safe. In the event that my investments go very wrong, CPF money is a nest egg that would have been protected from my follies.

So, I will not use the money for investments unless the propositions are very compelling like how things were in the GFC.

People can keep saying that CPF rules might change again and they are probably right. However, to be pushed into using CPF money for investments simply because of this is not sound financial decision making as far as I am concerned.

If the argument is that you fear changes to CPF withdrawal rules 30 years down the road, how would investing your CPF money now change anything anyway? CPF OA withdrawal rules could change too, couldn't they? ;p

EY said...

Hi AK,

Just wanna give my 2 cents on the CPF savings, about the possible changes on CPF withdrawal limits. There will certainly be, as we are already seeing frequent revisions to the minimum sum.

My personal strategy to 'beat' the revisions, as shared before, is to ensure my savings in CPF-SA exceeds the minimum sum by 40 years old. With $150K in CPF-SA by 40, assuming we hit the Medisave limit of $43,500, and with continued contributions up to at least 55 years old, we should be able to accumulate some $600K or more by 65. Whatever the withdrawal limit, we should have more than enough to set aside and the rest is free for our deployment to earn higher returns.

This approach would work for people who are okay with 'merely' 4% returns and willing to treat their CPF-SA funds as a hedge rather than an investment vehicle. Like the way you and I think. :) Frankly, each of us will have to decide for ourselves depending on our circumstances.

For me, I have done all the work I need for my CPF-SA and will have a peace of mind to let time and compound interest take its course to reach my goal. As of this month, I've got $133,534. :)

Endrene

AK71 said...

Hi Endrene,

I believe we share the same sentiments when it comes to the CPF-SA. :)

I did a quick check and my CPF-SA now has $159,570. I did my bit and time did the rest. ;)

However, I am still seriously entertaining thoughts of retiring by 45 years old. So, that is when my contribution to my SA might stop. Hmmm...

EY said...

Hi AK,

If your retirement plan materialises by 45, that would mean you won't be quite dependent on CPF-SA as a hedge. So no worries. :)

Besides, I'm sure the passive income which you would be earning would be in the mid-tier tax bracket, on the conservative end. With your financial prudence, bet you will top up your CPF to lower the taxable income. That way, you will still be growing your CPF-SA, rite? :D

For me, I have no retirement plan on the cards. Just tendered my resignation. Will be embarking on a new journey elsewhere. This is why I bought a car. Yes, expenses gonna increase. 2nd car parking isn't free where I live and what's more, I'm on waiting list! Number 28. Meanwhile, gotta park at HDB carpark for $90 a month. Car parking at my new work place isn't free either. :(

To support the additional expenses associated with owning a car, I think I would have no choice but to cut my frivolous expenses.
May well be a good outcome - to break my stubborn bad habit of shopping mindlessly. :D

Have a nice day and a great week ahead!

Cheers,
Endrene

Kyran Tan said...

Haha AK, I meant treating my CPF-SA and share builders separately. Not using the same pool of funds. So in a way I am diversifying all the 'risk factors' using 2 compounding tools for accumulating my 老本lol.

As of now I have some $72k in my SA, I can't afford to top up to the max ceiling. What I know is if I contribute $600 a mth (of which $300 is from my pay) over the next 30 years, I will end up with $656k. I am not pining any hopes to have much in OA since it will be used for housing installments.

AK71 said...

Hi Endrene,

If I should retire by 45 and if I should have retirement income which is taxable then, I suppose voluntary contributions to CPF makes sense. Thanks for the reminder. ;)

At the moment, the bulk of my annual income is non-taxable. At retirement, it would be nice to continue receiving this tax free income. :D

You are going to pay $90 a month for season parking? Coincidentally, I am doing this now! Haha.. Too many cars and not enough parking lots. :(

Looking forward to the completion of my little hut in the sky two years from now. Then, I will save that $90 a month but I will be saddled with a $300 a month maintenance fee. Brilliant! ;p

Congratulations on your impending move to greener pastures! :)

Er... Have you tried to get your new employer to pay for parking at your work place?

AK71 said...

Hi Kyran,

Ah! So des ne. Thanks for elaborating on your plan. :)

For housing instalments, you might want to consider having a token sum to be deducted from your CPF-OA and paying the rest in cash.

This makes sense to me as my cash in the bank is not making 2.5% per annum risk free.

In future, when interest rates go north of 2.5% per annum, you could increase the monthly payment from your CPF-OA as you had already made arrangements for a token sum to be deducted initially. So, there is no extra cost. This could be easily done online.

This was what I arranged with my purchase early last year. :)

Kyran Tan said...

Hi AK, ar ha! That's where the share builder will come into play. This will be my 'liquid' investment vs my 'not so liquid' SA. I do hope my share builder plan can make up or even better the 2.5% interest that an OA would provide.

I still need a substantial cash flow to ensure that besides the 2 long term tools i am undertaking, I will be able to capitalize on the dips! ;P

AK71 said...

Hi Kyran,

If investments using money from your CPF-OA are able to return more than 2.5% per annum, then, you should probably go ahead.

However, it becomes a little difficult to compare the returns since we should note the different levels of risk involved.

How are we to quantify risk?

For every unit of risk above CPF-OA's risk free returns, how many more % should we expect from our investments? This is mind boggling stuff.

Anyway, I am less adventurous, preferring to think of money in my CPF accounts as warchests no. 2 and no. 3. ;)

SnOOpy168 said...

Seeing EY & AK's CPFOA balance, made mine felt enviously little.

At least, the light in the tunnel says "You may pledge your property for up to 50% of the MS". helps to reduce the cash component required.

recharging my reserve fund. Still want that 2nd property and early retirement..... sianz, so much wish list and yet....

back to editing my photos to relieve the stress.

AK71 said...

Hi SnOOpy168,

That is the balance in my CPF-SA, not OA. :)

Don't be envious. You have made good progress and you know it. ;)

As for a 2nd property, I don't think it is really necessary. Nice to have but not a need.

However, if that is what you want, I am sure there will be a better time to buy one. So, being in the war chest filling mode now is rather prudent.

All in good time. :)

Kyran Tan said...

Hi AK, I would like to think of my share builders plan as war chest 2 and my SA account as war chest 3 then.

As for the limited cash i have that doesn't enjoy any returns without investments, let's just call it my 'wallet' hahaha. Able to buy things as and when i like :P

AK71 said...

Hi Kyran,

War chests, for me, are places where I have cash waiting for deployment. I have 4 in total:

1. An account with UOB
2. CPF-OA
3. CPF-SA
4. SRS

All waiting on the side for the next big bear. :)

I am not suggesting that anyone follow what I have planned, of course. Just sharing more details on my approach.

Everyone's circumstances are different and everyone's goals and comfort levels are different. There isn't an approach that fits everybody.

You have a plan you have thought through well and it is something you are comfortable with, put it in motion and hope for the best. :)

Kyran Tan said...

Haha now we all know where AK keeps all his $ LOL

AK71 said...

Hi Kyran,

Well, not all my $. ;)

I have a few other savings accounts for different purposes and I am also a bit old fashioned in that I keep quite a bit of cash at home too. Hahaha.. OK, enough said. ;p

Kim said...

Hi AK
Can CPF-SA be used for stock purchase? Always thought only OA in exceed of $20k, then it can bu used for stock purchase

AK71 said...

Hi Kim,

I shared in a blog post on CPF-SA that I used the money to buy into a unit trust with a Singapore focus during the GFC. That was a fund approved for purchase with CPF-SA. ;)

The money grew 4x or 4.5x faster within a short time of 6 months, if I remember correctly.

To help refresh our memory, here is the link: SRS, CPF-OA and CPF-SA.

Although some investors might write unit trusts off totally, I don't. Like I always say, I believe in being pragmatic and if unit trusts could help grow our wealth, I will buy them. :)

Kim said...

Hi AK
Thanks:)

AK71 said...

Hi Kim,

You are welcome. :)

caprichososhuz said...

Hello AK71,
thanks for being an inspiring read

I am 25, a lady, and is very interested in investing in the stock market.
I think stock markets and investing has been primarily a very male dominated field because i hardly hear of my girlfriends talking about stock investing so I am pretty much deprived of such talk.

What is your take on investing in a stock market for a girl of my age?I have worked for 2 years and am intending to get married in 5 years time. Do you think I should be putting my monthly savings into stocks for now? I have already an emergency fund of 6 months set aside and looking to grow my savings.

Another question is that is it wise to buy an insurance product (AVIVA global savings) that cost $250 a month for 30 years buying into unit trusts of overseas companies. The administration costs are pretty high and im beginning to regret buying this 2 years ago ):

Thanks!

AK71 said...

Hi capri,

I used to think that females are not interested in investing their money but seeing so many female readers commenting in my blog, I have to say that I am wrong.

I am sure other ladies here would be more than happy to share their views with you. Also, your girlfriends could be closet investors! ;)

I think everyone should consider investing some of their excess cash (if available). Excess cash would mean cash they won't need to use in the near future.

I really can't give you any advice. I am not allowed to do so.

However, I can say that since you are quite clear on your future plans, you have to decide if you are able to take any risk with your savings. 5 years is not that far away.

As for the insurance product, it sounds dreadfully like a fund of funds. Many people to feed... Not having more details on the product, I shouldn't say more.

AhJohn said...

Hi Capri, just two cents, I am regret I start investing too late, growing snow ball needs time! Of coz, everyone pays price, less or more, so I think you should start to try right now, but start with small.

cdoraem said...

hi AK,

I started working in 2005 and starting investing in unit trust in 2007 when price are at all time high. I thought that unit trust would be suitable for finance dummy like me. And I can ignore the price of entry due to dollar averaging and stuff like this. But I was very wrong. I was young and time was on my side. Unfortunately, luck wasn't. Now I felt very sad everytime I see how much money I have lost in the unit trust. It really seemed impossible that price would return to 2007 high

AK71 said...

Hi cdoraem,

I don't think you are alone in this. Many of us, if not all, have fallen in the same pit before. I know I did.

In fact, I still have 2 or 3 unit trusts bought a long time ago which are still in the red. I keep them to remind myself of my foolishness as there is little hope of them ever recovering.

Like any investment, timing helps to decide if it is going to be rewarding. Investing some money from my CPF-SA in a unit trust with a Singapore focus during the GFC generated an 18% return within 6 months for me, for example. A rising tide lifts all boats.

You are still young and time is still on your side. So, you can definitely climb out of that pit and leave it behind. If AK71 can do it, so can you. :)

AK71 said...

The number of millionaires in Singapore increased 10.3 per cent to reach 101,000 last year, revealed a new wealth report by Capgemini and RBC Wealth Management.

The survey tracks high-net-worth individuals with investable assets of US$1 million or more.

Source:
http://www.channelnewsasia.com/news/singapore/number-of-millionaires-in/717054.html

AK71 said...

Singapore is now the world’s fastest growing wealth hub with $1.3 trillion assets under management, and is slated to overtake Switzerland as the world’s largest offshore wealth center by 2020.

The average age of a Singapore millionaire is 49, one of the lowest in the world, but that of a multimillionaire is the highest at 66.


http://www.forbes.com/sites/neerjajetley/2013/09/27/anatomy-of-a-singapore-multi-millionaire-a-new-wealth-report-busts-many-myths/

AK71 said...

Singapore has jumped to the top of the Economist Intelligence Unit's (EIU) ranking of the world's most expensive cities, overtaking the likes of Tokyo and Osaka as the Singapore dollar appreciated against the yen.

Ten years ago, Singapore was number 18 on the list.

The EIU report compares the price of products and services such as food, clothing, transport and domestic help among 140 cities with New York city as a base.

And it must be noted that the EIU survey is aimed at helping companies and HR managers calculate allowances for executives or expatriates being sent overseas.

This means that their spending patterns may differ from locals. Hence, while cars and utilities are expensive, public transport and hawker food in Singapore are cheaper than in most developed cities.

Source:
http://www.channelnewsasia.com/news/singapore/s-pore-ranked-world-s/1019698.html

AK71 said...

Millionaire households in Singapore formed 10 per cent of the population in Singapore in 2013, down from 17.1 per cent in 2012, according to the latest report from Boston Consulting Group. The latest findings mean Singapore’s density of millionaire households ranks third globally, behind Qatar (17.5 per cent) and Switzerland (12.7 per cent).

Source:
http://www.channelnewsasia.com/news/business/singapore/singapore-ranks-third-in/1144148.html

youngnewbie said...

Hi AK,

Nice reading your article. I think $1M in another 40 (for those 25) might be suffice to buy a 4 room HDB? Pure guess. But nevertheless, the inflation de-value a million dollar today.

I had been in the market since 08/09. Currently, i'm close to reaching the million dollar target and i just work for 2 years. I'm thrilled to be like you. Haha.

My ideology is somewhat different from most investing peers. Since I'm young, I'm willing to learn and test out many strategies. Discover ways to increase sharpe ratio for my investments. Thus, i had both passive investment and active trading.
Thankfully, I was managed to consistent beat S&P500 returns for the past 7 years. To me, passive investment is a must but active management is the one that bought me the most return.

I think youngsters like us should research and know all type of investments vehicles from all around the world. And test out whichever investments vehicles that suits individual risk appetite.

Hopefully, one day, i need not worry about whether i had job or not, is more on working for self achievement.

AK71 said...

Hi youngnewbie,

Most likely, a very good trader would be able to grow his wealth much faster than an income investor. ;)

Congratulations on hitting the $1 million mark so soon. It seems that you have found a method that works for you. :)

Having said this, it is important to emphasise that all of us have to find a method that works for us and to do this well, self-knowledge is important.

Not all of us have the psychology to be good traders. I know I don't although I am familiar with the theories.

There are many ways to wealth building. As long as the way we choose is legal, ethical and something that does not make us lose sleep, I think we are on our way to success. :)

Matthew Seah said...

Hi youngnewbie,

Glad to find someone with similar growth spurt in wealth early in their financial path.

As your wealth grow past 1 million, you might want to look at shifting your wealth toward income generation and then you can choose not to work any more.

At that moment, you can truly do what your passion desires.

As for me, I'll be spending my life for something which outlasts it.

Good luck on your future endeavours ^_^
Matthew

Skye Rashfire said...

Hi AK,

I'm turning 25 this year and reading this at the start of the year really helps put things into perspective.

I am able to save 1k per month so hitting the 650 is no problem for me. My plan for this 1k per month would be to use it in Philips's share builder plan buying STI ETF. Knowing DCA, reinvesting and the annualized returns of STI ETF being around 6%, I should be on my way to a million by 65, ceteris paribus.

CPF wise, I started working not long ago so there's nothing much inside to talk about. However, I do intend to transfer bits of it every time from the OA to SA so I will max out 20/40 asap. Not going to put in any cash contribution since in about 5 years or so, I would be requiring money (marriage and housing), probably after.

I am stuck with this question though. When does saving stop? I'm not sure how to calculate and get to this point. Some do it by predicting how much they require to retire (lump sum). Others do it by calculating based on current salary, or at least the last drawn before retirement and compare to their passive income. How do I know if my saving plans are on track? In between, there will be big ticket items that require money. How do I account for that?

Not to worry, I'm not a hermit, I still spend and hang out with friends and still have spare cash to indulge in things I love doing. I'm a pay-yourself-first which makes all these plans possible. Your thoughts and comments?

AK71 said...

Hi Skye,

Very happy to read your comment. Seems like you have a good plan. ;)

When does saving stop? My answer? Only when you are retired, then, you could stop saving. That is when you start drawing upon your savings. To me, it is that simple.

For people who invest for income, they might never have to draw upon their savings as their passive income could be sufficient to cover their living expenses and more.

Prior to retirement, never stop saving. You never know if you might need more money in future for anything. It is always good to have more savings than less.

Some wonder why I have an emergency fund that could cover 24 months of living expenses. They think it excessive. Well, it gives me peace of mind because I know I cannot see clearly into the future.

I hope sharing my paranoia has been helpful to you. ;)

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