Sunday, June 6, 2010

Musings -- Achieving a million dollar portfolio

Musings is a category where I will muse about random stuffs

I remember in my primary school days, there's always essays on "what would you do if I have one million dollars". Somehow, the sample essays, or the essays written, were always about the same content, which are

1) I will donate some money to charity.
2) I will spend the money on a holiday.
3) I will spend the money to buy so and so something.

etc... etc... etc...

Looking back, it does appear interesting that very few essays would include using the amount in an investment portfolio. Perhaps some would say that they will use the money to set up a business, and that's that. I do understand that the main gist of writing such an essay is to train the students in thought processes, language skills as well as composition skills instead of skills of managing finances. Yet, I can't help thinking how this might impact the little minds 20 years later in the area of finance.

But... managing personal finances is a skill that everyone must have in order to live comfortably on this planet. With well managed personal finances, achieving a 7 figure equity investment portfolio isn't something that is impossible in our life time. You don't need extreme good luck to achieve it. You don't need to earn super high income to reach it.

All you need, is discipline and hard work.

Look, I'm not talking about people who are incapacitated somewhat without the means to earn, be it mentally or physically. I do donate to Community Chest in hope that some of my funds will eventually reach these people.

I'm talking about people like me, young, able, energetic, ambitious, and full of drive. The biggest advantage I have is age. Why merely dream of just a 7 figure portfolio? Work towards it! Yearn it! I see it in my mind!

To achieve the goal, one must have plans and strategies. Just like a house cannot be built without a blueprint, a website cannot be displayed without proper coding, an exam is seldom scored well without conscientious studying, a 7 figure portfolio requires proper vision, planning and strategy. Seldom will anyone wake up suddenly one day and find that they possess excellent financial knowledge and a 7 figure portfolio to go along with.

1 investment blogger that I know of, who achieved his 7 figure portfolio, is ghchua. He has stuck to his strategy for nearly 10+ years, and his portfolio has crossed into 7-figures. His strategy can be read at his blog.

Another story I heard of is from my broker. He has a university friend who was a banker. However, as a banker, he did not follow his peers who spend lavishly. Instead, he bought UOB (years ago) year after year. Subsequently, he has more than 100 lots of UOB at average of around $10. The dividends received from this portfolio is sufficient to feed him.

Yet another story I heard was this person, who's a banker as well. He consistently buys SingPost. He was retrenched in 2008, but the number of SingPost lots he has is sufficient to feed his whole family with another $50k to spare for dividend reinvestments. Basically, he does not need to work anymore to support his family.

What are common about these people? They settled on a strategy and stuck to it for years. They planned, they worked towards and they maintained the discipline to make sure their strategies succeed. 

These are just some strategies real life people have employed in their lives, and succeeded. What about us? What makes us any different from the people above? The younger we start, the better and easier it is for us!

But, some might say that it's not easy to start young. They tell me they have limited capital, so they can't invest. There are also other excuses. But to me, the advantage of being young is the amount of energy, drive and ambition we have. Utilise it to the maximum and capital would not be as limited anymore.

One disadvantage of being young other than limited capital: the amount of wants we can afford is less than our seniors as they have been out in the workforce longer. Discipline on delayed gratification is then needed here. What made the above examples succeed is that they had the discipline not to over-spend. They do not spend lavishly on flash cars that depreciate fast. They invest their money prudently.

Moral of the story: We definitely need a strategy to grow our wealth, and we need the discipline to stick to our strategy no matter what.

A strategy to grow does not only mean prudent investments or excellent trading. It encompasses an holistic approach. We need
(i) discipline, delayed gratification
(ii) how much percentage of capital to invest
(iii) strategies of investment, dividends or growth/value investing?
(iv) strategies to grow active income, both main source and side source
(v) strategies to grow passive income, i.e. blogs, property rentals, books

Every single thing plays a part in our journey, our quest to achieve a 7 figure portfolio, and ultimately financial freedom.

For me, my strategy has been presented in a few other blog posts.
My Money Allocation
Dividends Reinvestment Strategy
Goal 2010

Whether this strategy pans out well will only be known a few years later. Afterall, I'm only 2 years into the Singapore workforce. But so far, my strategy has put me slightly ahead of most of my peers.

A 7-figure portfolio? If I can maintain my rate of growth, I will be able to achieve it in 10 years time. And that's a big IF.

[Well, maybe I can achieve it faster than that.]


  1. Most people who are on good salary should be able to reach a million dollar portfolio by the time they retire.

    The hardest part is to make 6 or 7-figure net profit (realized and unrealized gains and dividends) from our portfolio before retiring.

  2. Hi CW8888,

    you are right. But for me personally, it's more of how fast I will take to reach a 7 figure portfolio. :)

    A 6 figure net profit isn't exactly that hard if 1 has a large portfolio.

    So ultimately, the size of the portfolio still matters, and the earlier it gets large, the better :)

  3. LOL. To clarify should be higher 6-figure like 8xx,xxx or 9xx,xxx.

  4. :)

    Still, a super large portfolio will be easy to generate that. E.g. thewealthjourney.blogspot.com

    His portfolio can generate him 6 figures in dividends and coupons from equities and bonds a year. 8 years and he will reach 8xx,xxxx just in dividends and coupons.

    That is my aim :)

  5. Hi JW,

    I am trying to get a year's salary from passive income generated from the stock market. ;-p


  6. You guys are millionaire investors. LOL

  7. Hi AK,

    I want to do that eventually too!

  8. Hi CW8888,

    I'm far from it, although it is my dream :)


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