Jan 13, 2020

Cory Diary : Investment Income

Start with saying the obvious. Main source of living expenses for most people comes from salary income . Even for those who are so called FIRE or Financially Independence, the seeds has to large enough, comes from salary income. Even then they may not completely retire. This statements are generally acceptable with the exceptions few.

As one grow older, various income source comes into play. What best to represent it is to show the Net Worth chart and the allocation within. Financially few things Cory did or don't.

1. Move most OA funds to CPF SA
2. Continue to leave some amount of CPF in Property Loan for another year
3. Continue to have SSB Max Out
4. Have at least 3 years buffers to support housing loan in FD
5. Transferred Allowances to parents. Happy New Year !
6. Annual Bonus to Nanny. Very Professional Nanny.

Cory long term goal is to have salaried income replaced by equity income that is more passive. This seems quite illusive with annual adjustment !  LOL ! Like many people who come from humble background, and has no business acumen, we just have to learn to save or we have to learn through business failures of which most of us could not afford without safety net. How long it takes to save and build up do depends on how much delay gratification we want. This amount becomes very handy once a door open. 

One main door open is Stocks Market. While Cory cannot run business, he can find good managers who can do this for him. So this is rather passive income. The trick is how to stay profitable in this business. This is especially make possible when the information gap is narrowed between institutions and retailers. And technology allows cheaper trading and more sophisticated products. Of-course experience in the market matters a lot. And then the saving slowly move in.

The next door opened when he starts to invest in property. This hurdle is harder to cross due to property curbs and needs for cash-flow to sustain. This is different from buying a property for one stay. The mindset is for investment gains and rental components. So why explore this ?
Like to mentioned Cory is not an expert and needs more buffers but the logic seems clear as below.

Cory is no longer young. Getting a loan will be harder. And it will be tough when one is without work one day. So if one want to invest in property, time is an essence too.

20% down for single property is like 5x leverage of a big sum of money. The mindset is quite different from stock investment where Cory do not leverage at all. 

Loan is relatively cheap with low rates. Even after all the misc costs, and even so rental unable to cover all the loans, as long the interests part (not the principal) of the loan is well covered into good portion of the principal payment, theoretically one is making good money.

The rates may go up but by then the loan would have been serviced for some period of time and there will be more options. Ideally we like it to be in as long as possible, and as much as possible with comfortable buffer as property loan is one of cheapest to tap on.

Capital appreciation factor for those with good location. Is more pricey logically. With land limited Singapore, unless we are seeing something like no future for Singapore, with inflation the price general trend is upwards with fluctuation in-between that can be quite volatile.

As long one is able to service, after rental, is quite hard to lose money after all the costs. The main risk is cash-flow which is why Cory put this as top priority to mitigate and not to assume Rental Income is sufficient. 

What will be the next door ?


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