Friday, 20 March 2015

New goal and strategy

"Instead, I aim to achieve a liquid asset of $650 k by 2024 (CAGR of 14.5%).  This will be attainable through increase of both cash portion (including $40 k from insurance by 2023) and investment return. With some planning from 2025 to 2029, I will probably achieve my $1 mil target by 2029 when I am allowed to withdraw from my CPF with the option of not working from 2025."

The above was written in September 2007. Fast forward 8 years, I am glad to say that I have made good progress and would probably surpass the above target if I carry on with my model "Work, Save and Invest". I strongly recommend this model for those of you who just started working. More on this in another post. 

Changes in life priority and new learning have led me to review my model in recent years. I have come to realise that to achieve financial independence, I would need to generate sufficient passive income instead of just aiming to attain a certain amount by a certain year.  There are quite a number of ways to generate passive income. It's in my plan to check them out after I put in sufficient effort to review my investment portfolio.

As shared in an earlier post, my new model is "Invest, Cash Flow and Work". Moving forward, I am aiming to have my investment portfolio to provide increasing amount of cash flow, so that I can rely less on income from my work.  

I am treating my investment as a new business, with the current portfolio value being the initial outlay. At the moment, business growth will come from would have to come from growth of stock value and dividend. My target is to grow my portfolio by CAGR of at least 8%. To achieve this target and mitigate risk, I would allocate my portfolio with the following guideline:
  • 60% of the portfolio will be invested in companies that regularly hand out dividend and provides a yield of about 5%.  REITs will form part of this 60% but no more than 40% of the entire portfolio.
  • 40% of the portfolio will be invested in growth companies with consistent ROE of at least 10% or positive growth prospect. Out of this, no more than 10% will be used for punting on potential story.
No cash would be withdrawn from the portfolio before 2020In the event that stock market crashes within this period, I might terminate my FD to load up more stock. A review would be made on portfolio allocation in November/December 2019. 

From 2020, cash would be withdrawn annually to supplement income from job till 55 when (AND IF) I can withdrawn my CPF beyond MSS. With proper planning on fund allocation at 55, I am confident that I would achieve my financial independence.

Sounds pretty similar to my updated plan in 2007 but it will be 5 years beyond the original plan. However, the different is that I have switched to part-time working from this year onwards. And who knows, with this new focus in investment (and some luck), I might still able to achieve my financial independence by 2024!

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