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How to Get Rich (Realistically) and Stay Wealthy (Guest Post)

How to Get Rich (Realistically) and Stay Wealthy (Guest Post)

The majority of the rich who got really wealthy took calculated risks. They also had the foresight to see things that a lot of us would not be able to see.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 800+ followers.

Rich people surround themselves with people more competent then them in areas they are not good at.

Most of the time, the wealthy was also able to execute their plans very well. You will also find them having the ability listen to others when it is time to listen. But be steadfast when they needed to.

I got very little of these traits.

And maybe that is why I am not rich (by today’s much higher standards). I worked in a firm where we steward our client’s wealth carefully, so I know where I stand in the spectrum of people who are rich and poor.

But I do think that I have enough wealth for myself though. Enough for me to have a conversation with you on this topic.

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Family Inc: Measures of Health of Family Wealth (Guest Post)

Family Inc: Measures of Health of Family Wealth (Guest Post)

Personal finance books would usually teach us how to tell whether we are in a good or poor financial position.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 800+ followers.

Today, we continue with our Family Inc Series with a look at what Doug McComick recommends as metrics to measure the health of our family wealth.

You could use these metrics for a snapshot of how your family is doing. You could incorporate them into your tracking as well.

I take particular interest in this chapter to see if there are metrics that we can incorporate into my firm’s financial planning practices. You gotta keep trying to do better.

It is important for you to have an idea about your income and net wealth. And having personal income and balance sheet statements are a way to know how well you do.

We take a look at what Doug thinks we should take note of.

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Family Inc: Viewing Your Career as Investments (Guest Post)

Family Inc: Viewing Your Career as Investments (Guest Post)

Since we are on the topic of job switching, I thought of writing some financial and non-financial decision points I considered when making these decisions that I had over the years.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 800+ followers.

However, these thoughts are rather jumbled up in the head. And this week, is not the most conducive to think about these things because I am picking up some stuff… that requires a little bit more manpower.

So perhaps that will be left to next week.

One book that have been on my mind to write about was this book called Family Inc.

This is not a very popular book, but you can find a few in your national library. I planned to see if I can do a series on this book because I find a lot of what he talked about my resonate with my readers here.

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7 Areas to Think About when Planning for Retirement as a Single Person (Guest Post)

7 Areas to Think About when Planning for Retirement as a Single Person (Guest Post)

I have been single for a large part of my life.And if you are doing some planning for your finances going forward, some aspects that you will think about as a single will be whether there are things that I didn’t realize I need, just because I am single.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 700+ followers.

There are some things that I am concerned about, and they do not start with money. The clearest is that in the event of different degrees of disability, how would that affect my life? How much higher cost would I need to support such a change in lifestyle?

Kiplinger came up with an article titled Planning for Retirement as a Single Person that I thought is pretty good. I thought it will be those articles we can gloss over but turns out it covers different aspects.

I listed out some of those points without the flowery words. For the singles like myself, it might be good to take a look and see if you will need to cover some of your bases.

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Generating Perpetual Passive Income – Contrasting the American and British Way of Measuring Wealth (Guest Post)

Generating Perpetual Passive Income – Contrasting the American and British Way of Measuring Wealth (Guest Post)

There are two ways of measuring wealth.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 700+ followers.

I didn’t realize this explicitly. I did note this implicitly.

The American Method of Measuring Wealth

The first way is the American method. In United States, when they refer to wealth, you tend to hear someone say, “He has a net worth of $1,500,000.”

What she means is that if this person in question sold her assets, settled all her debts and deposited the remainder of her money into a checking account in a particular bank.

This method of measuring wealth grew in popularity during the rise of Rockefeller and Carnegie.

We can call this net worth or net wealth (because people find the link of wealth to worth to be uncomfortable)

And you can compute this using the personal net worth here.

The British Method of Measuring Wealth

The second way is the concept very prevalent in Great Britain a century ago. In London, the financial capital of the world back then, you tend to hear someone say, “He has a private income of $100,000 per annul.”

This is referring to the household income generated by her portfolio of investments.

This income represents the money the owner could spend without touching her principal. According to the experts, this is not similar to the sustainable maximum withdrawal rate, which is the constant inflation adjusting method of withdrawing money.

Household Income Accentuates the Functional Utility of the Wealth Compared to the American Method of Determining Wealth

One draw back of the American method of measuring wealth is that some of the assets can be rather unproductive.

Here are some examples:

1.Richer people can own a piece of land that is valued at a very high price but cannot be easily sold. They might not be willing to sell it as it is a family heirloom, many family members vested interest determining what they should do with the piece of land

2.A landed property in land scarce Singapore is very valuable so the landed property, if liquidated can fetch a lot of money. However, in terms of how much it could rent for, it might not perform as well, in terms of per square foot net rent, compare to other forms of property. Against other form of investments it might not provide the same level of efficiency as well

3.You could own many different assets such as an expensive motorcycle, and cars. You should be able to liquidate them. However, if you lose your high tier job, a person might be caught in a frame of mind that cannot readily liquidate these assets and turn them into cash flow. They might be unwilling as well

The British method focus on the functional utility of your wealth. It allows you to see how the wealth can change your life.

The first thing is how much of your expenses, that you pay with your work income, can this stream of cash flow replace. This stream of cash flow increases your current overall purchasing power.

It allows you to:

1.wear nicer clothes

2.donate more to charity

3.expand your investment holdings

4.send your grand children to university

5.have better food

The savvy people would know what to do with a lump sum of wealth. Unfortunately, not many are that savvy. But if you have an inexhaustible stream of cash flow, it is easier to think how you could spend this money to help the people around you and yourself.

Most importantly, it limits you from making poor decisions with your money.

Based on sunk cost theory, if you wake up, you could always say “I do not care about what I do with the cash flow in the past, let me plan what I would do with the cash flow going forward”. If you have a lump sum and you erroneously spend it in an inappropriate way, it is not going to come back.

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How I Am Planning For An Early Retirement In Singapore (Guest Post)

How I Am Planning For An Early Retirement In Singapore (Guest Post)

Most people aspire to achieve financial stability to enjoy their retirement with peace of mind. My dream is no different from others. Since I entered the workforce, I have been working towards achieving financial independence before the age of 35 and having an early retirement. The journey which I took has pushed me out of my comfort zones at times, and it’s tough.

Thankfully, my wife has been supportive of my decisions and goal.

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This post was originally posted here. The writer, Brian Halim is a veteran community member and blogger on InvestingNote, with username known as 3Fs and 1700+ followers.

When we had our first child in 2014, my wife had to quit her job to care for our son and deal with the household chores. This decision had a direct impact on our savings and lifestyle. It was not easy to manage the additional expenses with a single income.

We began to tweak our strategies. Unnecessary spending was reduced. We also started to save aggressively and managed to save about 40% of the income over time.

But savings alone will not be enough to achieve our goal.

The various investments I had made were relooked at to find ways to grow our income. For it to be sustainable, we need our income to grow at a rate of 8% per annum. I looked at the various options that were available and performed allocations based on prevailing market conditions.

These are some of the investment tools which I currently have on top of my current equity portfolio:

SPDR Straits Times Index ETF

The SPDR STI ETF was introduced in 2002 and is managed by State Street Global Advisors, while the Nikko AM STI ETF was introduced later in 2009 and is managed by Nikko Asset Management.

The main benefit of investing in the STI ETF is that the investor gets to gain exposure to the 30 blue chip constituents of the benchmark index through a single purchase at a very low cost.

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The Permanent Portfolio Might Do Worse in Retirement than the Traditional Equity Bond Portfolio (Guest Post)

The Permanent Portfolio Might Do Worse in Retirement than the Traditional Equity Bond Portfolio (Guest Post)

When it comes to wealth accumulation, many are a fan of Harry Browne’s Permanent Portfolio. Recently I wrote about it here.

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This post was originally posted here. The writer, Kyith is a veteran community member and blogger on InvestingNote, with username known as Kyith and 700+ followers.

One of the main take away from my article yesterday on how do you make $500,000 last for 60 years by withdrawing an initial amount of 5% of the portfolio was that high volatility is not very desirable when it comes to spending down our wealth.

So naturally, the permanent portfolio comes to mind a portfolio that is made up of components very uncorrelated that reduce the overall volatility.

If we revisit the table of portfolios recommended by famous experts the PERM and Risk P have the lowest standard deviation, lowest maximum draw down (MaxDD), good risk adjusted returns (Sharpe).

So how would they do in Timeline App?

I try to fix as much of the variables as yesterday’s base case, with only modification to the portfolio allocation:

1. I have a wealth of $500,000 that I wish to live off of

2. I want to see if I can start off spending $25,000 for the first year of my financial independence. This is 5% of my initial wealth of $500,000 (we call this an initial withdrawal rate of 5% versus the 4% withdrawal rate)

3. For subsequent years, I increase and decrease the $25,000/yr based on the inflation rate. If inflation is +4%, it will be the previous years’ spending x (1-0.04) and if inflation is -2%, then it is previous years’ spending x (1-(-0.02)). I will maintain my purchasing power (inflation adjusted)

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Should You Leverage Up Your REIT or Stock Portfolio? (Guest Post)

Should You Leverage Up Your REIT or Stock Portfolio? (Guest Post)

There is emerging trend of experts teaching folks to build wealth with the aid of leverage. Leverage means, using other people’s money, in a lot case the banks money, to aid you in building your asset base.

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After the large DFA article last week, I do not really feel like writing a lot of stuff. There is probably a lot of other stuff I need to catch up upon then to do one humongous article every week.

So this week one is a little breather. It is some numbers that I ran some time ago.

I think I decide to bring it out.

This post was originally posted here. The writer is a veteran community member and blogger on InvestingNote, with username known as kyith and 700+ followers.

You have folks like Kim Eng who is able to give to loan you currently a 3.28% interest rate loan on your shares. This enables you to buy shares more than you can afford to and speculate on them. When you earn as you sell off the shares, you earn a lot more. Conversely, if you lose as you sell off the shares, you lose a lot more.

Now, the idea for a lot of people is not to do leverage irresponsibly. We all want to do the sensible thing, but to make use of what is available to us so that we can accelerate our wealth building.

So basically, rather conservative wealth builders wish to use leverage to step up and build their wealth. It makes me wonder how conservative we are.

Here is the Setup

We are going to invest in good blue chip stocks and Real Estate Investment Trusts (REITs).

And we are going to choose to invest in 1, or more of these, to form a portfolio that gives us a 7.5% per year compounded rate of return (hypothetically). If you want to take a look at whether its achievable, you can take a reference on the dividend yield that you can get on my Dividend Stock Tracker. Those are dividend yields, and do not show the future compounded growth rate. The growth rate can be +2 to 5% or -2 to 5%, depending on which you choose. Not all stocks are appreciating over time.

Let’s say we make use of Kim Eng’s margin financing which enables us to invest in selected stocks and REITs at a rate of 3.28% (this rate used to be 2.88%. When the global interest rate moved up, it also gets shifted up. This gives you an idea that these rates do not stay stagnant).

According to the strategy, we want to use leverage to build up our financial assets.

However, we do not want leverage to kill us. So at some point, we will pay back the debt.

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