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Hi to all ValueBuddies,
I need some insight, if you may. I'm planning to retire soon and want to live off my investment income.
Currently I have about 2.5m in stocks investment.(mainly for yield)
My business is worth about 0.6m
2 young kids
Renting
No debt
I plan to put aside about 300k being 3 years of living expenses(as a hedge against a bear mkt, where dividends could be cut and stock values plunge)
I plan to live off my dividend/distribution income @ 4-5%pa.
I understand some forummers are living my plans and hence would very much appreciate any input especially in poking holes in my plan.
Thanking you in advance
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Hi Kevlee,
Liquidity needs is certainly important, setting aside 300k should be more than enough.
I also noticed that you are currently renting. Perhaps getting a fully paid house may be a good idea since you wont be subjected to the mood of the landloard. The house is to be viewed as a cosy place for residence and not as a form of investment.
Otherwise, i think your plans look pretty okay. Anyway, congrats to your early retirement!
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2.5M easily generated annual cash needed to maintain above average lifestyle. Congratulation.
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(26-01-2013, 11:48 AM)kevlee Wrote: Hi to all ValueBuddies,
I need some insight, if you may. I'm planning to retire soon and want to live off my investment income.
Currently I have about 2.5m in stocks investment.(mainly for yield)
My business is worth about 0.6m
2 young kids
Renting
No debt
I plan to put aside about 300k being 3 years of living expenses(as a hedge against a bear mkt, where dividends could be cut and stock values plunge)
I plan to live off my dividend/distribution income @ 4-5%pa.
I understand some forummers are living my plans and hence would very much appreciate any input especially in poking holes in my plan.
Thanking you in advance
If you have 2.5M in stocks investment mainly for yield, you can easily have > 100k in dividend $/year; regardless of B or B market. At a "lousy average" of 4% dividend yield, you already have. You should have more than this yield regardless of the markets.
Unless unfortunately one or more of the company you bought go "belly -up". Everyone of us should be very careful about this "belly-up" fish. Ya? Me very frighten of this fish leh!
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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Have been doing something similar. Two points to note that will affect the amount you should put aside for living expenses and as a hedge against a bear market:
o The biggest drop in dividend from one year to the next that I have experienced in my portfolio thus far is roughly a 33% cut in 2008/09. So if your expenses is less than 67% of your yearly dividend year you may be able to make do with less of a cash cushion for living expenses.
o At the depth of a recession, some of your counters may do a cash call. You may end up being severely diluted if you have no cash cushion for that and other investment purposes especially if there is a "sale" on.
Just for sharing, I only keep about 50% of my yearly living expenses as a cash cushion (mainly for emergencies) as I aim to control my living expenses to below my yearly dividend income. Last year it came in at about 75% so the cash cushion is worth about a great recession event lasting more than three times as long.
I separately hold 10% of my portfolio in cash as an investment opportunity fund and deploy it only if I can buy a portfolio of stocks for P/E 6 and below.
Finally, you may want to think through the possibility of a systemic black swan event that can throw you completely off course. A personal example for me is CLOB in 1997 which set me back a couple of years.
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I have similar worry on being set back a number of years which may de-rail my retirement plan completely.
My plan is to phase in 15% cash at a time probably by roughly Quarter or when there is significant delta from my current investment. In that way i reduce being caught with all my networth put on the table. Make sense ?
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personally, i would have at least 3-5yrs liquidity in cash. my portfolio is in 7figure range. true, if gfc hits again, i might lose a 7figure sum. but all these are just paper losses. i won't be too affected by this. cos otherwise my life and emotions would be dictated by the market. so long as u have liquidity, u can sleep thru. not forgetting the dividends from the stocks. how many s'pore companies actually went bust during afc n gfc? i think if tge fear is too great, all the more u shd keep more cash.
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still having 2 young kids and you are talking about retirement?
Either you are too rich, or you did not think it through.
In economic sense, young kids are unlimited liabilities.
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haha. actually, i am in my mid thirties also, have 2children aged8&10. i casually discussed abt retirement with my dad n my wife. both thoroughly disagreed with my idea. they said who in the world retire so young. u r mad. i gave up the subject after that. nothing changed after that. i continued working but just a bit less.
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