Advice for age 42

[Eternit]

"Income" and "growth" are opposites. When you build a portfolio, you can either focus on capital gains (having the value of the shares grow) or on income (getting dividends from the portfolio); you can't do both, because stocks with high income tend to have low capital gains.

Hmm but if you invested in DBS stock 5 years ago, you'll be up 132.37% AND collected quite a bit of dividends no? Getting both growth and income?

You're right to say that for someone with a job, he/she doesn't need dividend income. But I think the attraction of dividend stocks is building and having that stream of dividend income now so one can have the choice of stopping employment (for a while or permanently) and enjoy life while they are still young.

I have discussed this topic with @BBCWatcher before, and I know both of you are not a fan of dividend stocks haha. In reality I did heed the advice and most of my portfolio is in IWDA and VWRA. But, everytime I see people getting big dividend payouts that could cover a big chunk of their expenses, and having choices in life to work or relax since they have the predictability of another dividend payout months down the road , while I have to drag myself to work so I have a fixed income to survive (and buy IWDA/VWRA for future growth), just makes me feel a bit imbalanced and a tad sad?

Not sure how to reconcile this. @Shiny Things @BBCWatcher

 

[wutawa]

Hmm but if you invested in DBS stock 5 years ago, you'll be up 132.37% AND collected quite a bit of dividends no? Getting both growth and income?

You're right to say that for someone with a job, he/she doesn't need dividend income. But I think the attraction of dividend stocks is building and having that stream of dividend income now so one can have the choice of stopping employment (for a while or permanently) and enjoy life while they are still young.

I have discussed this topic with @BBCWatcher before, and I know both of you are not a fan of dividend stocks haha. In reality I did heed the advice and most of my portfolio is in IWDA and VWRA. But, everytime I see people getting big dividend payouts that could cover a big chunk of their expenses, and having choices in life to work or relax since they have the predictability of another dividend payout months down the road , while I have to drag myself to work so I have a fixed income to survive (and buy IWDA/VWRA for future growth), just makes me feel a bit imbalanced and a tad sad?

Not sure how to reconcile this. @Shiny Things @BBCWatcher

I can't agree more. having passive income definitely helps. sheng siong also good although I am not vested in sg stocks.
I am a cspx investor. my broker scb doesn't have a min fee, so I can periodically sell 1 share of cspx as "div". it works like an inverse drip.

 

[Soomp!]

I can't agree more. having passive income definitely helps. sheng siong also good although I am not vested in sg stocks.
I am a cspx investor. my broker scb doesn't have a min fee, so I can periodically sell 1 share of cspx as "div". it works like an inverse drip.

CSPX very costly now
800++ SGD per share...

 

[Soomp!]

I kind of envy dividend warrior who went from dividend and then to a growth investor...

I'm trying to copy what he is doing

 

[CrashWire]

CSPX very costly now
800++ SGD per share...

You can buy fractions of it in some brokerages.

The price doesn't really mean much.

 

[BBCWatcher]

I have discussed this topic with @BBCWatcher before, and I know both of you are not a fan of dividend stocks haha....

This isn't complicated.

Dividends are fine. Capital gains are fine. I'm "returns form neutral." Don't filter stocks based on the form that they deliver returns to shareholders.

Where do you think dividends come from? If/when a dividend is paid, the capital basis for the stock falls. You can see that phenomenon when a stock hits an ex-dividend date. Moreover, there can often be a "tax drag" with dividends. For example, you, a tax resident of Singapore (only), are whacked with a 30% dividend withholding tax on U.S. stock dividends. Capital gains attract 0% tax. Would you prefer to pay 30% tax or 0% tax?

Let good managers of these companies figure this out for you. Including the tax implications. If/when those managers figure out how to deliver more returns to you more tax efficiently, be happy!

In reality I did heed the advice and most of my portfolio is in IWDA and VWRA. But, everytime I see people getting big dividend payouts that could cover a big chunk of their expenses, and having choices in life to work or relax since they have the predictability of another dividend payout months down the road , while I have to drag myself to work so I have a fixed income to survive (and buy IWDA/VWRA for future growth), just makes me feel a bit imbalanced and a tad sad?

Dividends aren't predictable. They go up and down. And history is littered with worthless stocks that used to pay dividends before they went bankrupt.

Do you think someone holding $10 million of Amazon or Berkshire Hathaway stock (that they purchased for $1 million) doesn't have "choices in life"? (Those are two examples of stocks that have never paid dividends. Not a recommendation to invest in individual stocks.)

Years ago — in my grandfather's time — there was a meaningful difference between dividends and capital gains because it was relatively difficult and expensive to sell stock holdings. The commissions were high, and usually you needed to sell large blocks of shares. None of that is true any more. Commissions are as low as zero, and you can sell 1 share (or even in some cases fractional shares) whenever you want. And get exactly what you want, not some arbitrary forced distribution (often tax inefficient) that's almost never going to be what you actually need.

Relax! Too many people get so weird about this stuff and make it way too complicated. Let the broad index work for you.

 

[JetStorm]

I used to think like you until i get to learn these people

1. Shao Chun, 2 million USD age 38
2. Christopher Ng,2 million at age 39
3. Contra Turtle, 4.5 million USD age 38
4. Dividend Warrior - he is in Hwz too

These are called rich
I'm already 42 this year and my portfolio is still way far from target

Everyone have different income & expenses & lifestyle. So no use comparing also. Best way is to compete against yourself. For me try to ensure that my portfolio every year should try to be better than the previous years can already.

 

[hwmook]

I kind of envy dividend warrior who went from dividend and then to a growth investor...

I'm trying to copy what he is doing

You should learn and not copy what he is doing. Frankly I also started investing around the same time as him and started out learning from him. But over the years I have long changed my investment strategy base on my own learnings.

 

[Eternit]

This isn't complicated.

Dividends are fine. Capital gains are fine. I'm "returns form neutral." Don't filter stocks based on the form that they deliver returns to shareholders.

Where do you think dividends come from? If/when a dividend is paid, the capital basis for the stock falls. You can see that phenomenon when a stock hits an ex-dividend date. Moreover, there can often be a "tax drag" with dividends. For example, you, a tax resident of Singapore (only), are whacked with a 30% dividend withholding tax on U.S. stock dividends. Capital gains attract 0% tax. Would you prefer to pay 30% tax or 0% tax?

Thanks for your wise words @BBCWatcher, but DBS stock doesn't seem to have such issues? Its share price capital gains has increased significantly raised over years, while shareholders also enjoyed good dividends on top of the capital gains. Also there's no tax issues since it's SG stock.

What's your opinion if I supplement my VWRA/IWDA holdings with DBS stock? Cheers.

 

[BBCWatcher]

Thanks for your wise words @BBCWatcher, but DBS stock doesn't seem to have such issues?

Sure it does! DBS's stock price is lower than it otherwise would be because the company hasn't bought back shares and otherwise hasn't used dividends to expand its enterprise value to generate even higher capital gains. Its share price has increased, and it has paid dividends. But so what? That just means the stock has (recently anyway) rewarded shareholders in a fairly arbitrary mix of modalities, that's all. Some stocks generate nice returns for investors, and some don't.

Dividends aren't bad, and capital gains aren't bad. But "there's no free lunch." Net returns are net returns. Literally, who cares what form they take? Let the company's good managers figure that out!

Its share price capital gains has increased significantly raised over years, while shareholders also enjoyed good dividends on top of the capital gains. Also there's no tax issues since it's SG stock.

Actually there are some tax issues in two ways. Dividends are taxed pre-distribution (at source) at 17%. If DBS's management had instead decided to retain earnings and use them for business investments — R&D, etc. — it's likely the tax treatment would be more favorable since those would be classified as business expenses. That doesn't necessarily mean the company's management made a bad decision. Taxes are only one factor to consider. But there is a potential "tax wedge" there.

Second, DBS's share price is influenced not only by tax residents of Singapore but taxpayers around the world. Speaking for myself, I would enjoy a lower effective tax rate if DBS stock provided me with higher capital gains in lieu of dividends. So potential U.S. investors are "turned off" to some extent by the way DBS provides returns to shareholders.

Nonetheless, maybe the company's management made the right decisions. I take no view on that. Nor should you. Don't filter stocks based on how they provide net returns to shareholders.

What's your opinion if I supplement my VWRA/IWDA holdings with DBS stock? Cheers.

If you're intending to retire in Singapore then I think it's reasonable to allocate some percentage of your investment portfolio to a Straits Times Index (STI) stock fund, lately Amova's GAB. But other than Employee Stock Purchase Program shares, and then only for a short period of time, I don't think it's a great idea for retail investors to invest in any individual stocks.

 

[wutawa]

I kind of envy dividend warrior who went from dividend and then to a growth investor...

I'm trying to copy what he is doing

u should also be flexible like him. adjust your sails with the wind.
阴在阳之内，不在阳之对

 

[Soomp!]

You can buy fractions of it in some brokerages.

The price doesn't really mean much.

Does IBKR offers it ?

 

[Soomp!]

What are your opinion that DBS project that STI will hit above 10,000 pts and also SGD to appreciate beyond USD.

They had assumption on their 100 over pages of report.
DBS is just like our Singapore pride.

 

[Mephist0pheLes]

I'm an income investor mainly focus on dividend stock in Singapore market.

I had less than 20 shares on CSPX and little of US shares such as 1000 in grab, 500 over in NOK and 2-3 in VTI.

Portfolio size is 161K and mainly into REITs of Singapore.

I had read about the 4 percent draw down from the portfolio and to be financially independence.

Intend to retire at age 50 with the size of 500K portfolio. That is 8 more years for me.

If based on 4 percent draw down, per month is just 1,666 and for sure not enough to retire in Singapore.

Intended to rent out the whole HDB to supplement my retirement with this 1,666K. During my retirement, intending to do some side hustle such as youtube, offering some consultation services and stuffs, but anyway these are the later part...

If hdb can still be rented out for 3K, with 1,666 SGD from portfolio, I think should barely be enough to retire overseas. Targeting either Malaysia or Indonesia.

Question are
1. This 4 percent drawn down is it applicable to income investor too?

2. I intend to pump in 120 per day, is there any other faster way to get 500K portfolio faster ?

3. DBS looks expensive now, should I wait for it to drop or just get into it ? I got into OCBC because I feel DBS is overpriced but of course they are of 2 different fundamental

4. Is there any other way for me to work on getting my portfolio to go slightly faster ? Don't ask me to bet on high volatility stocks / Cryptocurrency/ Forex and etc. Old man can't take the volatility anymore.

The 4% rule was based on survival analysis of a specific portfolio (70% US stock, 30% US bond iirc), over a 30-year time frame. I personally wouldn't feel safe using anything more than 3%, especially if you are retiring early.

On paper, it shouldn't matter if your stocks are income paying or not. but in practice, most income investors are also stock pickers. and individual stocks carry idiosyncratic risk. you are also subject to concentration risk with most of your exposure in SG and in REITs. Imo, i dont think this is a retirement portfolio. It is a bet on interest rate and property cycle. If it turns south after your retirement, you dont have enough diversification to save you.

And there's only 3 ways to hit $500k faster. Earn more, save more or take more risks. There's no such thing as higher return but with same risk.

 

[Mephist0pheLes]

What are your opinion that DBS project that STI will hit above 10,000 pts and also SGD to appreciate beyond USD.

They had assumption on their 100 over pages of report.
DBS is just like our Singapore pride.

all forecasts are rubbish. analyst cant even predict the index value at end this year, let alone 10 years later.

 

[wutawa]

What are your opinion that DBS project that STI will hit above 10,000 pts and also SGD to appreciate beyond USD.

They had assumption on their 100 over pages of report.
DBS is just like our Singapore pride.

can u share the source from dbs stating sgd will appreciate beyond USD? thanks

 

[henrylbh]

can u share the source from dbs stating sgd will appreciate beyond USD? thanks

It is possible that sgd will appreciate beyond usd. It's a question of time frame.

It was 3 sgd = 1 usd and 3.5 sgd = 1 aud when I was in school. Now aud sunk below sgd though OZ is a resource rich country.

 

[Dividends Warrior]

I kind of envy dividend warrior who went from dividend and then to a growth investor...

I'm trying to copy what he is doing

You can do it too my friend!
Build your financial freedom pyramid layer by layer, but do it in a way that suits your personal situation. What works for me might not work perfectly for you. Cheers!

My FY2025 Portfolio Update

 

[Soomp!]

You can do it too my friend!
Build your financial freedom pyramid layer by layer, but do it in a way that suits your personal situation. What works for me might not work perfectly for you. Cheers!

My FY2025 Portfolio Update

Hi DW,

Glad that you responded.

I saw that you are building the portfolio on the top now.
For level 2, you had hit 1 million.

I am like 25 percent of where 1 million is now.

 

[Soomp!]

can u share the source from dbs stating sgd will appreciate beyond USD? thanks

https://www.straitstimes.com/busine...e-s-on-a-par-with-us-dollar-sti-hit-10000-dbs