The sequel to the podcast I did with The Fifth Person last month is here.
I just watched it and I thought it would be good to tie up a few loose ends.
If viewers should spend some time ruminating on what I said in the follow-up podcast, they would not need to read this blog post.
So, this blog post is more for my benefit since I have a need to talk to myself all the time.
AK is mental.
1. My response to a viewer who said most regular folks would have to speculate in order to generate sufficient capital to get a $200K dividend annually from investments.
There is no need to speculate although we could certainly do it and in the podcast I shared my view on that.
There are other ways to make more money and regular readers know I did some trading and I also had side hustles to make more money.
I also blogged about how we should not wait until we have a larger amount of money before we start investing for income.
Dividends made in the early days, no matter how small, would grow our wealth, and could be used to invest for even more income.
2. Possible to make $200K dividends annually with $2M and how to get $2M in capital?
In the podcast, I said that my capital wasn’t $10M, $5M, $4M or $3M.
It could have been closer to $2M.
And that is giving me $200K in yearly dividends now?
How is that possible?
Elementary, my dear Watson.
A lot of what I bought was bought during crises, when Mr. Market was suffering from severe depression.
By now, my experience with AIMS APAC REIT should be quite well-known.
It is one of my largest investments and probably my oldest one.
It generates a distribution yield of more than 10% on cost for me, year after year.
As I got into it in a big way during the Global Financial Crisis, it is a major contributor to my yearly passive income.
Of course, my investment has been free of cost for many years too.
I have recovered my capital and I am still receiving income from my investment.
So, of the $200K in dividends received last year, a big chunk of it was actually free money.
It is money generated from nothing.
How did this happen?
It is possible to get higher dividend yields during crises if we invest in the right businesses that would survive the crises.
Of course, we could choose to sell these investments if their stock prices should recover later on.
I used the examples of Lippo Mall Trust and First REIT in the podcast.
Regular readers of my blog would know there were others like Saizen REIT, Croesus Retail Trust and Accordia Golf Trust as well.
Selling for significant capital gains grew my wealth.
It gave me more capital to invest with.
We could also choose to sell a portion of our investments like what I did with Old Chang Kee and Hock Lian Seng.
I sold half of my investments in them when their share prices doubled.
So, whatever I am still holding now is free of cost.
And they are still paying me dividends, year after year.
More free money.
This brings me back to the earlier point on speculation.
Why is there a need to speculate in order to grow wealth?
Simply wait for the next opportunity to make significant investments for income like what I did during the Global Financial Crisis.
Invest in good businesses which are able and willing to pay us.
That opportunity came in the form of the COVID-19 pandemic not too long ago.
Of course, regular readers would know that I emptied my war chest during the pandemic and got into UOB at $19 a share.
That is one of my largest investments today.
It is rewarding me with a dividend yield of almost 9% per annum now.
I also talked about how I started buying into DBS at $13 and $14 a share back in 2016.
At $13 a share, the dividend yield is almost 15% per annum today.
Now, coupled with free money I get from AIMS APAC REIT and some other stocks, do you see why I say the capital deployed isn’t as much as what some people say it is?
What I have done over the years isn’t simply putting some of my monthly salary in fixed income instruments unless we count the CPF.
If that was my method, then, yes, to generate $200K yearly in dividends now, I would need around $4 million in capital today.
I agree this would be insurmountable for most regular folks.
So, I remind myself of what I did over the years and how I made what seemed impossible happen.
This might be a lot for some people to take in.
There is also the fact that my skill as a wordsmith has regressed in recent years.
So, maybe, read this blog post a few times.
Ruminate on it.
I know I had to.
AK is talking to AK here, after all.
Please don’t let people tell us what AK has achieved is not possible for regular folks because the capital required is enormous.
It is simply not true.
This blog post is the truth.
Go share this with people you care about and tell them this.
AK is a regular folk too.
If AK can do it, so can you!