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Thursday, December 11, 2014

4 Best Ways To Earn Passive Income (In Singapore)

We all dream to retire at the young age of 67 40. But let's face it, most of us regular Joes aren't born with a silver spoon. Every now and then, our plans to grow our retirement fund gets derailed, either by a major event (Sickness *Touch Wood*, Marriage, Buying a house, having Kids) or simply by our lack of financial planning during our prime.

If you are guilty of the latter, then hopefully this article will help you make a decision sooner rather than later.

Passive Income And Saving

Here are 4 of the Best Ways To Earn Passive Income in Singapore!

1) Stocks (Blue chips via a Regular Savings Plan)

Buying a stock can be a nerve wrecking experience. After all, we have read about major market crashes that have wrecked the stock markets and left many penniless.

When talking about Stocks, i am referring to the established companies in Singapore. For example, the Telcos (Singtel, M1, Starhub) or even the Banks. Whilst i am no stock expert, we all know that certain industries/businesses are pretty resilient to market down turns, as they have a prudent and solid business strategy. 

These companies also tend to give a steady stream of dividends which will contribute to our passive income!
While there is an element of risk in every investment, there is also the chance to make decent gains. I would advocate that you read up and equip yourself with the necessary knowledge before diving head-on into the stock markets.

For starters, POSB has a product called the "Invest Saver": Link here. These plans regularly invest small amounts of your money into a basket of stocks (see ETFs), providing you with a diversified 'portfolio' and spreads your risk across the different market segments through dollar-cost-averaging.

2) Property

We all know that Singapore is land scarce (our HDB flats are just getting higher and smaller in size). Also, it is a known fact that many of the rich businessmen in Singapore today made their fortunes from buying and selling properties/land.

With the recent cooling measures set by the government, if you have spare cash on hand, investing in a nice piece of property that would yield rental income is always a great form of Passive Income generation. When there is an appreciation of value, they can even be sold at a hefty profit.

3) Real Estate Investment Trusts (REITs in short)

If we don't have the means to invest in properties, why not consider buying into a Real Estate Investment Trust - REIT in short?

A REIT is essentially a collective investment scheme that invests in a portfolio of income generating real estate assets such as shopping malls, offices, hotels, hospitals or serviced apartments.

Another important caveat is that REITs MUST pay out at least 90% of net income after tax. The yields on some of these REITs are pretty good!

You can read more about REITs here

Some resources that i personally use:

SG Reit Data : This site consolidates all the prices of REITs listed on the SGX.

4) Bonds / Fixed Deposits / Savings

Bonds, Fixed Deposits and Savings tend to give the lowest returns on investment. Mainly because they tend to be the safest (see risk-reward).

These products usually have a fixed tenor whereby your principal amounts will be locked-in. Breaking of the deposits will usually result in reduced or no interests at all.

There are ways to Supercharge your savings to probably attain the same interest yields as a fixed deposit. 

Regardless of which way you decide to make your money work for you, always remember to arm yourself with the necessary knowledge! 

Hope you enjoyed reading this article.

Good luck on your journey to creating enough Passive Income for retirement! 

Retirement At The Beach