Saw this article on The Sunday Times on 5 Jan 13 (the same article can be found here). The article highlighted that many young adults ask themselves the question – What is the secret to being rich.
The article mentioned fives ways of getting rich:
- Born to rich parents.
- Marry someone rich.
- Starting your own business.
- Climbing the corporate ladder.
- Through investments.
So which one do you think works for you?
Personally, I felt that the first two ways (born to rich parents and marrying someone rich) are out of the question. My parents have tried to provide their best for me and I marry whom I love and not in terms of how much she is worth monetarily. The remaining three options are still plausible.
By climbing the corporate ladder, it is basically landing yourself in a job that pays you decently so that you will be able to accumulate wealth (spending lesser than what you earn). To save more, you can either spend less or move up the ladder. So one have to improve on their worth (at work) or tighten their (budget) belt.
With a decent savings plan in place, the next step will be putting your wealth to work through either investing in your own or other people’s businesses to generate more income.
Having own business
Having your own business does not necessarily mean it must big. It can be small and done purely out of passion and getting paid at the same time (e.g. making small ornaments for sale through the web, writing on blogs and earning through ad networks). I write guides for some of the technology stuffs and try to earn a few Starbucks cuppa along the way.
Part of other people’s businesses
Did you know that you can also be a small owner of companies like Singtel, Sheng Siong? That is by buying their shares! This is essentially investing in other people’s businesses. Or perhaps own real estates and earn rentals. And that is REIT (real estate investment trust).
Investment risks and horizon
Regardless of the type of investment, there bound to be risks involved. So work out your risk appetite and investment duration. Are you a high risk taker that goes after big returns and don’t mind equivalently-sized losses. Or are you someone who only like to tread in safe waters, ok with marginal returns (as long as it is better than bank’s interest rates) and losses once in a blue moon? Are you looking for returns with in a matter of months (or even days or hours) or a decade down the road?
Building up your portfolio
Once you have worked out the above, you should have a clearer idea about the yield you wish to have and when you want to realise the yield. With this, you can slowly build up a diversified portfolio with the appropriate amount of risks and returns.
As for me, it is not really about getting rich. It is more of achieving financial freedom. I’ve just started my investment journey and learning how to analyze the value of the businesses by looking at their financial statements and keeping a lookout for their news while flipping the newspapers. Only investing in it when I feel comfortable with the business. Well, people often say “invest only when you use their services”.
You might make bad purchases along the way but don’t worry, take it as a lesson, learn from it and you will improve. Who doesn’t commit mistakes?
As for yields or returns, the dividend of the various companies are published at SGX. You can use it as a gauge for their future dividends. Personally, I look for past trend of increasing dividend, preferably increasing same or faster rate than inflation.
While my strategy is to invest in dividend paying businesses to achieve financial freedom, what is yours?