Table of contents:
How To Start Investing In Dividend Stocks – Investing in passive income: 10 popular ways to earn passive income in Singapore and are they worth investing in? Put in the initial effort and let your investments pay off.
Imagine a day when you can sit back and watch the money roll in. That’s the allure and promise of passive income investing.
How To Start Investing In Dividend Stocks
Unlike growth or value investing, income investing focuses on earning a return on your investments. While you can expect a reasonable payout on a regular basis from your passive income investments, you shouldn’t expect explosive growth. It’s not Tesla or Bitcoin that can bring you huge cash returns (and volatility).
Investing Basics: Dissecting Dividend Yields
Instead, the key to passive income is to build enough of it by continually compounding it and reinvesting all the income to a point where we can survive the entire year with the annual returns on our passive income investment.
CPF Life is not something that comes to mind when we think of passive income. However, CPF Life is a passive income investment that every Singaporean should own.
Essentially, CPF Life is a government-mandated lifetime annuity for all Singaporeans that provides monthly payments (after age 65) for their lifetime. Depending on whether we choose a Basic, Standard or Increased Plan, our fees and final will will be different.
For those turning 55 in 2023, based on a full pension amount of $198,800, we can expect lifetime monthly payments of about $1,550 under the Standard Plan. Unlike private annuity plans, where there is a risk of the insurer defaulting or the non-guaranteed portion of payouts falling short of expectations, CPF Life payouts are guaranteed by the government.
Investing In Dividend Stocks • 2nd Skies Trading
Also Read: How CPF LIFE Can Give You Passive Monthly Income Worth the Median Salary – $3,000 – When You Retire in Singapore
Singapore Savings Bonds (SSBs) are bonds issued monthly by the Singapore government through the Monetary Authority of Singapore (MAS). There is a minimum investment of $500, the capital is guaranteed and you can easily withdraw your capital at any time. SSBs can be a good way to diversify your sources of passive income.
The interest rate for the March 2023 SSB issue is 2.9% p.a. to keep it for a full 10-year period. As the interest rate environment increases, the higher yield makes this investment an attractive “risk-free” investment.
A popular income investment product recommended by insurers, pension plans or annuities offers an attractive mix of guaranteed returns, protection and even greater non-guaranteed returns. These products provide regular payment during retirement. You pay premiums through a lump sum or regular premiums during working years and receive payments from a certain age.
Understanding Dividend Yield And How To Calculate It
The advantage of personal annuities is their flexibility. You can customize these products to best suit your personal needs. Want to retire early? It is possible to find the product starting from 55, even before that. However, diverting a portion of the investment into conservation may reduce future returns.
Understand the policy details before committing to one of these plans. There is usually a high penalty for early termination. Here is a detailed analysis of how to read a benefit illustration.
Guaranteed principal and regular payments make bonds attractive to passive income investors. However, the “guarantee basis” is still tied to the bond issuer’s ability to repay the debt. Some investors may recall the Swiber bond default in 2016, where bondholders were unable to repay their interest or principal.
Apart from Singapore Savings Bonds (SSBs) and other government-issued bonds of Singapore, you can also invest in corporate bonds and bond ETFs in Singapore.
What Is Dividend Yield Ratio: A Basic Guide
Typically, corporate bonds have higher coupon yields than government bonds and bank deposits. Most corporate bonds are traded in the Over-the-Counter (OTC) markets. A small subset is traded on the stock exchange. These are also known as retail bonds. Popular ones include Temasek bonds and Astrea bonds.
As an investor, we can choose to invest in different fixed income ETFs based on the type of market or sector we want exposure to. Some of the fixed income ETFs listed on SGX are traded in both Singapore Dollar (SGD) and US Dollar (USD), so investors can choose which currency to invest in.
Currently, the ABF Singapore Bond Index Fund ETF, which invests primarily in a basket of high-quality bonds issued by the Singapore government and quasi-Singapore, has a 10-year annual return Nikko AM SGD Investment Grade since inception of 0.974%. The Corporate Bond ETF, which invests in investment-grade corporate bonds, is 0.29%.
A Singaporean investor’s favorite is rental income. Most Singaporeans feel that owning a second property and renting it out is a reliable way to generate income.
Dividend Investing & Income Explained
However, it may not be as passive as we think. Achieving consistent rental income requires skill and luck in finding good long-term tenant(s). After accounting for all the maintenance, administrative and maintenance work, it can be more difficult than we think. Outsourcing to an agent may be possible but will eat into our rental income.
Renting a 4-room HDB flat in Ang Mo Kio will bring us a monthly rental income of about $2,900 before expenses. If you don’t already own a flat, a 4-room HDB flat in Ang Mo Kio will cost around $555,000. However, you will be subject to HDB’s buyer eligibility and tenancy restrictions; You will not be able to rent out the entire apartment until the 5-year Minimum Occupancy Period is over.
REITs are essentially property investments and allow investors to access property investments in Singapore and other major property markets by pooling our money to invest in a diversified property portfolio.
In addition to investing in individual REITs, investors can also choose to invest in multiple REITs through ETFs of REITs, unit trusts, or robo-advisory services such as Syfe REIT+.
Dividend Stocks For Dummies: Carrel, Lawrence: 9780470466018: Amazon.com: Books
As an asset class, REITs are required to pay 90% of their earnings as distributions to unitholders. Because of this, many REITs have relatively high distribution yields.
If you want to start investing with Syfe, has an exclusive partnership with Syfe – enjoy 0% management fee on your first $30,000 within the first 6 months after signing up. Apply here to take advantage of the campaign.
Mutual funds (sometimes known as unit trusts) are professionally managed investment funds that raise money from investors to buy securities that can be any tradable financial asset (not just stocks). Some mutual funds may be designed to track a specific index, while others are actively managed by fund managers to achieve a specific investment objective, such as beating market returns.
Depending on the fund manager’s focus, you can find mutual funds that focus on income investing and generate a strong regular payout through a mix of bonds, REITs and other fixed income assets. Some may even include an equity component to increase potential income.
Dividend Investing: How It Works And How To Get Started
However, be aware of the fees. Some mutual funds charge high fees, which can increase your earnings, especially over time.
Robo-advisors are digital platforms that use automated solutions and algorithms to help us invest and manage our money. Similar to mutual funds and ETFs, robo-advisor platforms pool the funds of many small investors to make large and diverse investments.
Currently, there are several robo-advisors that offer products aimed at generating income. Highlights include StashAway’s Income Portfolio and Endowus Income Portfolios, which offer monthly payments based on different income and growth needs. Income Syfe’s REIT+ focuses exclusively on REIT investments and provided a dividend yield of 4.6% in 2019. MoneyOwl’s WiseIncome is a flexible income solution that offers payouts of 4.5% to 8% p.a., including payouts on your capital.
If you’re interested in getting started investing with Endowus, you’ll be pleased to know that readers can take advantage of a $20 entry fee credit as well as a 100% entry fee discount through December 2022. Sign up using this link to claim this special offer. Terms and Conditions apply.
Benefits Of Investing In Dividend Yielding Stocks
For those who want to try the StashAway platform for yourself, StashAway offers a 50% discount on management fees for portfolios up to $50,000 for 6 months.
This makes it perfect for trying out StashAway and seeing if it’s the robo-advisor for you. You can sign up for free today to take advantage of this exclusive promotion.
Dividend stocks are another source of passive income available to investors. However, dividend payments have the potential to be more volatile as they may be cut depending on the company’s performance and economic variables.
For example, in 2020, MAS adjusted the bank dividend limit to 60% of 2019. This resulted in a dividend yield of 2.7% to 3.1% in 2020 for the 3 major banks, DBS, UOB and OCBC).
Dividend Vs Growth
Apart from blue-chip stocks known for their dividend yields, such as bank stocks, investors can also check out listed stocks that pay high dividends. However, since shares offer no capital protection or guarantee, investors should pay more attention to the company’s fundamentals to see if dividends are being paid consistently.
Also Read: Singapore Banks
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