Recently, over the New Year, the strangest thing happened to me. My wife asked me to help her with investing her money. Which is the equivalent of snowing in June!
Yes, I blog about personal finance and index investing. And no, I have never, ever bugged her about investing her own money. The only thing that I “enforced” was for both of us to have integrated H&S MediShield plans with the necessary riders attached, in case stuff happens.
Have you watched the movie Inception? I’m a little guilty of playing this trick once in a while. Sometimes, it works!
For the dipping of toes into the water, I thought for a long time before deciding on what to do. Index investing of course, what else can it be! Or is it?
How Much Money?
Her first question was, how much money do I need?
It was a tiny first step, and I wanted to make it impactful without putting too much money on the table. Looked around the current offerings, and decided on a grand total of $4,000.
Index Investing Or ..
No, I didn’t go down the route of index investing. The right time and opportunity aided me in my decision.
I went with dividend investing and specifically, retail REITs. The very next day when the market opened, I bought 1,000 share of CapitaLand Mall Trust ($1.89) and 1,000 shares of Frasers Centrepoint Trust ($1.90), both of which are trading at decent prices to me. And refunded her the unused $174. Incurred $18 per trade as a result, and absorbed all the cents cost myself.
Not a stock-analysis blog here, so I’m afraid you will have to pick up a copy of Building Wealth Through REITs by Bobby Jayaraman if you’re interested to learn more.
$4,000 is a great starting point. Not too huge an amount (I know, subjective), but not insignificant either. Even the most defensive of REITs currently have a yield of 5% or more (Investment Moats has a great dividend tracker), and this translates to a quarterly distribution of about $50.
The imagery of being handed a crisp, blue $50 dollar bill every 3 months is a vivid and tangible outcome that many people can associate with.
You see, starting with $4,000 gets you a $50 payout every 3 months. Imagine this. What if you had invested “only” $12,000? You can get, on average, $50 every, single, month! That’s like an invisible elf/dwarf who works hard 24/7 with no complains and earns money just for you!
By going the route of REITs, you get instant gratification via frequent and periodic distributions. Instant gratification, like social media “likes”, is an extremely powerful and addictive force. Seeing, feeling and touching results is a strong positive reinforcement.
In this instance, retail REITs also have the advantage of being an “easy” business to understand because of the amount of transparency available to investors. This will become a stepping stone for me to explain the idea of buying a business, and not hocus pocus stuff. And obviously, towards *cough*index-investing*cough* in future.
To make the venture even sweeter, I guaranteed her capital. If the share prices go up, she gets to keep the capital gains if she chose to sell in future for any reason. If the share prices fall below purchase price and for some reason, she must liquidate them, I will absorb all losses. All dividends, she gets to keep 🙂
I’m fortunate to be in the situation of being able to do this for her.
Recently, I took the effort to load all my SG-only transactions into SGXcafe starting all the way from Dec ‘2012. That’s exactly when I started the predecessor of this blog Index Investing in Singapore on Christmas Day. Along the way, I sold all my Nikko AM STI ETF (OMG look at that $3.48 purchase price in May-2013) for SPDR STI ETF instead. The charted report looks interesting. As you can see, it is an exact replica of the Straits Times Index ETF in terms of peaks and troughs pattern.
I wonder if she understands the awesomeness of risk-free 5% interest haha! Like me, she intends to surrender her investment-linked policy this year so we’re looking at a possible injection of funds someway down the line. So now, I’m the manager of a mini portfolio, which I have also started tracking in SGXCafe. How fun! (SGXcafe is a great tool and Evan has worked really hard on it. Support it if you found it useful!)
More Than Index Investing
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