Long Term Investing Strategies In Singapore
Here are some of the recommended long term investment strategies I would use. Do take note that all of these strategies are all about having a steady cash flow at the time of your retirement.
#1 Property Rental
Imagine at 25 years of age, you buy a 99-year property at $1,000,000, you invest $200,000 (20%) as first deposit, then the rest of $800,000 use bank to loan for 30 years, with 2.2% annual interest loan. You rent the $1 million property out, and the breakeven amount is $2,271.11 monthly rental (you should rent out at least $2,700 due to yearly incurred expenses).
BUT the rental rate is against the owners! You may be asking. Even if you can’t fetch $2,700 or above rental, it is ok to make a loss of no more than $500 per month. Because you are in the long term gain of having the $2,500 monthly for your retirement planning.
So let’s move on….
When it’s in the 30th year, you would have paid off all the property loan and the property would have increased in value (land is limited in Singapore, and value will increase gradually). By then, you would be 55 and earning a passive income of $2,500 or more from your property rental.
You can choose to continue to collect property rental or sell the property at a profit when you are 55.
#2 Invest STI ETF
STI ETF is investing in the top 30 strongest companies in Singapore. This is one of the best ways to invest in the long term, the strategy used here is dollar-cost averaging.
What Is Dollar-Cost Averaging (DCA)?
It is an investment strategy that buys a certain investment in a regular schedule and fixes the amount of money, regardless of the price of the investment. DCA is usually used in stocks investing. The investor will buy more stock when the stock price is low, and buy less stock when the price is high.
#3 CPF Investment
As you realised that every Singaporeans who are working or worked would have some amount in their CPF account. You would be able to have cash flow given to you when you reach 55. I know that it’s a lousy idea to depend on CPF Investment, but it’s a compulsory setting aside of monthly salary money for all Singaporeans.
You may want to read the guide on CPF Investment which I have written.
30 years is a long time! Is it possible for early retirement? Can my retirement age be earlier than 55?
Retirement planning is all about having a stable and comfortable cash flow to use when you reach a certain age and continue to use it without having to worry. What you need is to find out the financial instruments or strategies that suit you and your current situation, and invest in it. You can choose to retire now or earlier when you have enough cash at hand.
Wisdom Tip: Do know which level you are comfortable investing in and think of who are dependent on you, before investing.
#4 Selling Options
A lot of people know Warren Buffett, he’s the well-known investor for using value investing. BUT did you know that Warren Buffett is selling options while waiting for the best time to buy the company shares he wants before using value investing?
Here’s what Warren Buffett did…
When Warren Buffett found a company that he thinks can invest in using value investing, he will wait for the time to purchase it at a low price. But the issue is that the wait can be a very long time, like 3 to 5 years.
Instead of waiting for the price of the company to drop, he sold naked put options to earn cash while waiting.
Example (the value below is for illustration only)
Warren Buffett has been eyeing on Company A because it fits his value investing criteria, but it is priced at $50 per share. He will only enter at $30. While waiting, he will begin to sell naked put options at $30 per share, where he will earn $2.50 premium per share. He will continue to do so when the Company A price is at $30.
#5 Start A Business Part-Time Or Full Time
But what business!
It can be any business that has proven strategy with good consistent ROI that’s suitable for you.
I have heard of someone whose business is simply making ice cream cone, even the ones in fast food restaurants.
Have you seen those automated laundry service stalls at the ground level of HDBs? These are great cash flow generating business. Why would someone want to use the automated laundry service at the ground level of HDB flats?
Because of laundry and drying machines;
- takes up a lot of space at home
- requires lots of electricity (especially for the drying machine)
- spoilt within 3 years.
- are expensive.
- does not make economic sense to repair.
Of course, you need to do your due diligence when you buy or set up a new company.
#6 Make Money Online Sites
Have you heard of bloggers who make thousands of dollars every month? Using only their website or blog. I have friends who just earned money this way.
There are 3 ways you can make money online,
- Sell your own products or services.
- Promote someone’s products or services.
- Get pay for driving traffic to another website.
All 3 ways require to have the skill of driving online traffic to the website. I am no expert in this field, but I do have some knowledge of how this online marketing is about. There are various ways to drive online traffic, but the best way is using SEO, where the website is rank on search engines for commercial search terms that millions of people are searching for.
Is there any example? YES!!!
Wirecutter.com started in 2011 by Brian Lam, and within 5 years or so was sold to New York Times for USD$30 million in Oct 2016. It started off as a review site for electronic gadgets. It earned a commission by referring their website traffic when someone purchases something on the affiliate site, like Amazon.
Wirecutter.com was driving USD$150 million in e-commerce transactions a year, where Wirecutter.com will be paid off from 2-4% of the product sale. Even if it’s using a 2% commission for each product, Wirecutter.com would earn USD$3 million annually, where each month is generating about USD$250,000 of cash flow.
That’s cool, right!
#7 Earn Dividend From Stocks
Most people buy stocks because they want to hold and to earn a dividend.
There is a “Dividend Capture Strategy” where one finds out when the listed company is giving out dividends on a particular date, buys the stock a month or so before the payout, and sells it in within a day or 2.
Once the dividend is paid out, you simply sell the shares. Your strategy is simply to earn a dividend.
You will need to do a lot of homework on this, as there’s a chance that the stock price might drop after the payout. Because they are also using the Dividend Capture Strategy.
How to find out the dividend payout date for Singapore listed companies? Visit https://www.dividends.sg/ to check the latest dividends payout.