Sunday, December 31, 2023

Plotting my Investment Strategy for 2024 - 5 Pots of Gold

Now is a good time to re-think my investment strategies and plan the way forward. 

I started off by thinking about the eventual goal I want to achieve. It is clear that I would like to achieve a certain amount of dividend income every month for perpetuity.

The question is: what should this amount be to be realistic?

Let's start off with $5,000 in monthly dividend income and run some numbers.

As of the end of 2023, I am pulling in SGD 1791.39 in dividend income every month, which gives a shortfall of $3,208.61 as you see above. 

From the above, we see that to achieve $5,000 in monthly dividend income, I need to invest an additional $1,048,184.06. 

Obviously, I do not have this much amount to pump in at this moment since I am no longer earning a monthly salary. 

I figured that I could invest at most $300k, by rotating money from some of my other investments (ie. china stocks, robo-advisors, etc.). This gives me the below:

Ok, the above numbers seem more realistic! It will take me 3 years to achieve a monthly dividend income of $2500, by which I will be around my mid-forties. 

So the next question is which funds to invest in? Note that I have stopped buying individual stocks - it is difficult to get it right. Buying funds are much less risky and have a higher probability of profit. Also, there is 0 chance of the counter going to zero, unless the country collapses. I considered the below funds. Those in green are those I am already actively investing in, those in yellow I am considering whether to start. 

In the end, I decided to invest in TLT. Reasons:

  • iShares MSCI World ETF is very similar in composition to SPDR SP500 ETF, which I already own
  • QQQ Trust has the highest returns but is volatile. What is more, my goal here is to earn dividend income, for which QQQ is very low
  • TLT has a decent dividend yield. Returns are low, but I am looking for stability with a consistent income stream ie. perpetual income. Less volatility is especially important for my profile now as I do not want to sell stocks when there is a crash and lose tons of money. Further, bonds have dropped a lot in this high-interest rate environment. Bonds are expected to rise in 2024. 

It is also worth considering the various funds I am accumulating now - I call them my 'pots of gold':

The barrels you see at the bottom of the diagram are those that I am building up. The STI ETF pot is already full. The S-Reit, ABF S'pore Bond, and SP500 pots are around half-full. TLT pot will start this year. The eventual goal is to fill all of them up to the brim. 

The above is not drawn to scale. Below I created a chart that is to scale, based on my current holdings. All bars should be full in 3 years. 

What do you think? Does it make sense to you?


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