Active verses passive income from an income tax perspective

[weijian]

well, I have been putting in 12-14hour days for the first 10 years of my life after graduating. family is one. age not really, as I am in my thirties. I made pot of gold in business, properties and other non-equity investment years ago. In fact, share investment itself is already taking a risk as I am not account trained by profession. But that risk itself is mitigated by knowledge. Somehow, thus far, I seemed to hit a correct chord in my equity investment and this is slowly gaining a significant footage in my overall wealth. When I started off, I never imagine this to be a significant part as this was part of tikam money to begin with nearly 10years ago. Or maybe, so far, the big bear is waiting to maul me into pieces. I do not know. But I keep my fingers cross. I just continue doing what I am comfortable with. And spending more time on my family and children is a major part of it.

Reminds me of Dr Michael Leong's comment that one is better equipped to be an investor, if he/she were already a business owner. Hours of accounting practice, reading and playing with the calculator seldom beats one who knows what it takes to run a business, how the owner thinks to survive the competition and manage the cashflow etc. You have started out well ahead of many other fellow investors.

[Drizzt]

i think one can hold a well constructed passive portfolio of etf and bonds if the time horizon is long enough that makes use of the rise of corporate profits over the long term.

a simple yearly rebalance will do, plus perhaps reinforcing the psychological and behavorial aspect of things.

you have to be aware that some folks are better focusing their time on their work. the increment of 2000 per month may beat any investments you have at a level of risk.

the values of most would be better serve focusing their limited time on family instead of prospecting and watching companies.

some wealth building techniques require a certain level of competency and a level of maintenance that many underestimate

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[Temperament]

To me i am a OPMI in any investment only if i have no part at all in running the business directly. Still i have to run the business indirectly. So there is really no such thing as "passive investor" if passive means you just open your two pockets and collect $$$. Ha! Ha!
At times, as an "active investor" - aka business owner who runs the business is much better than a passive investor. As a passive investor you can only vote with your money and nothing much more you can do.
Is that why we have IPOs???

[gautam]

hi weijian,
u know, an old friend of mine, since nus days used to tell me that my ability to run a business actually helped me in my stock investment. i used to find that hard to believe. since i hardly read about books on stocks nor attend any stock guru lessons.
on the other hand, my this old friend is better learned. he even attended forex and equity sessions (not cheap he told me). when we meet, he would tell me this guru says must look at rising roe, that guru says must see fcf. I told him that I am a simple man. I don't know most of these terms. I see main parameters like pb, pe, div. I look at businesses that has been kept running and profitable for the past ten years and predict which would continue to do so for the next ten years. How investing in them would translate to shareholder benefit/risk. Once identified, I stay vested and use the simple principle of div compoundation. Yet my result is far superior to someone who has read a lot and attended paid seminars.
weijian is the 2nd person who said the same thing based on his knowledge of me. I think there must be some truth in it then.

Hi drizzt,

> I agree with most of what you said. But " the increment of 2000 per month may beat any investments you have at a level of risk."

To me, to a lot of people, that increment of 2k/mth is not easy to earn. It might involve many more hours at the desk or more siong still, physical labour. And those 2k of blood sweat tears are taxable.

I agree that investment is not for everyone, but they have to know that:
1. Money earned actively is the hardest, yet taxable.
2. Money earned with people earning it for them is an easier way, if taxable also basically nevermind, since its not difficult money.
3. Money earned through dividends already get taxed, is the easiest way, and not taxable at our receiving end. To me, if that skill is mastered, is the easiest money of them all.


Gautam

[Drizzt]

may be not that hard lah, but folks used to bandied the word "passive" around too much.

[opmi]

may be not that hard lah, but folks used to bandied the word "passive" around too much.

Coz using it to selling whatever koyok (courses, properties, MLM, gold schemes, etc) they are selling.

To me, "passive income" is still OK.

Turn-off word is "financial freedom". I prefer "financial flexibility"

[Temperament]

What ever we like and can do, ( aka active or passive business or ?) will usually will bring us the bacon home. We must like to do it first. The rest of the journey, we are discovering what we can and can not do.
Like i found myself very hard to believe in technical chart interpretations. Because it can be interpreted only after it happens. In other words, it's logical only after the fact. No offence intended here (To each his own)
i also believe in things can be keep as simple as possible(Einstein) or you can make it as complicated as you one. i agree with gautam making stock investment as simple as possible.
i believe life can be lived as simple or as complicated as you want.
(To tell the truth, with my minimum education, even if i fancy to make it as complicated as possible, i don't have the ability.)
So i try to keep it as simple as possible yet trying to understand the people who like to make it as "complicated as possible".
Just be careful not to be mesmerized into disillusion that i am an "expert" in the stock market interpretation is most important.
Which i did from times to times.
Then i lost money lol.
Hence i choose below WB's Rule No1 & Rule No2 signature.