The holy grail of investing (Part 2/3)

Step 2: State exactly your financial aim

How much exactly do you need to achieve your financial aim? Exactly how many years do you expect to achieve this?

Reminder: make sure that your financial aim is always aligned with your life aims, with what you really want in life.

Write down the exact amount that you need.

This way you’ll have a clear aim of what you need to achieve and not just some vague “I want to be able to live off of my dividends after I quit my job”.

How much do you need to be able to live off of the dividends after you quit your job?

The answer will vary depending on whether you have another source of income other than your job and planned investments, where you live or plan to live and your chosen lifestyle.

The reliability of your future source of income and the age at which you want to retire or quit are also factors that you should consider. Dividend yields are not as good as they were in the past, and who knows what the future holds? It won’t be so great if our seemingly reliable retirement fund becomes another General Electric (GE).

And many of us (myself included) want and plan to retire much earlier than the traditional retirement age of 55-60 years old. We’ll have more years post-retirement to cover and if you have children or plan to have children, you’ll also have to take this into account. Retiring at 60 might mean that the children are all grown up and can support themselves, but if you retire at 40 or 30, you’ll have to consider what you’ll need to pay for the childrens education and other needs.

The amount you come up with will be a factor in determining whether your desired time frame is realistic or not.

And it might tell you whether your method of accumulating wealth is workable.

If you’re a salaryman earning 10K a month and expect to make 1M to retire in 1 years time, I don’t have any good, fair probability of success suggestions.

An investment of 10K a month will make you a millionaire in one year… If it grows 2500% a year 🙂

Well… actually there is a way I know of. In fact, it gave a friend of mine a 3000% return – in one night! And may have made a lot of money for many high risk takers.

Buying a PUT option on FB stock just before the August 2018 gap down would have returned >2000% in one day.

So if you had bought 120K worth of FB PUT option just before this fall, you’d have been a millionaire the next day 🙂

Gambling would have been less risky with almost as much probability of success I’d say.

Of course the higher the risk, the higher the possible return. Balancing the two, and determining where on that balance you can afford and mentally manage to be is also something you’ll need to find out. It wasn’t a risk that I was willing to take – and certainly not with risking more than 15 months of my pay.

For me, the answer is “I want to make RM 2M in 10 years time. RM 1.5M will be in my ASB investment accounts (more on ASB later) and my income and growth portfolio. 300K will be my emergency fund. The remaining 200K will be used as business capital and in higher risk endeavours”

Is it workable for me?

Not if I’m only depending on my job for investment funds and investing for income alone. Which is why I also invest in real estate, newer forms of investments like crowdfunding, taking some higher risk in potential growth stocks and looking for alternate sources of income to supplement my salary and increase my investment fund.

This is why you have to decide exactly how much you want to make and how long you are willing to give time for your wealth to grow to that extent.

No one can really tell you how best to invest or trade because no one is you other than you yourself. Others can guide you but in the end, you are the only one who can decide what is best for you. So learn and try, and decide on what is best for you.

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