Monday 17 April 2023

Interesting Postings On Websites & Blogs Over the Weekend- 2nd Investment Property and Flaws in General Dividend Investing Mindset.

I thought that it is rather interesting to see 2 "related" posts over the weekend. One post is on a couple in their 40s who earns S$280K per annum and thinking of getting a bigger second private property for own stay and then letting out their existing property. The thing is that there seems to be some folks who are keen to pursue their dream of owning a private property for own stay and then having another private property for passive income purpose. The other post is by Kyith from Investment Moats over the weekend on flaws to watch out for in adopting the Dividend Income approach for retirement which makes a lot of sense. There is a part from the post on some folks who based their retirement entirely on the local banking trio (DBS, OCBC & UOB) for dividend income and exposes the danger lurking in the corner for doing so.

What is common/related among the 2 posts?
Rental income and dividend income are similar in the context that for retirement planning, both serves as a "passive income stream". So the point that I am making here is that for folks whose main future income stream comes mainly from one single retirement source which is a local investment property, there is simply just too much concentration risk.

Private property prices in Singapore is absolutely crazy for me, let alone buying a second property and taking up huge mortgage in order to derive a rental income stream from it and then get saddled in  over-concentration country risk (unless one is super rich to buy many properties in different countries and also other form of investments).
Recently, I met-up an old buddy for dinner-he was from my University days who lived in a HDB with his family. He got too much cash on hand from his bonuses over the past few years. As he does not want to invest in unit trusts and stocks which is "too volatile and risky for him", he decided to opt for a "safer and proven" investment route, that is, a 2nd property for investment in district 10 (1 bedder with  half of it financed via mortgage), jointly invested with his wife, at cost of S$1.2 Mil- imagine the ABSD of 12% on that property which would have been a whopping S$144K donated to the Singapore government. 

Parting thoughts
I thought that what Kyith has posted is a good wake up call for all not just in dividend investing but also those who dabbles solely in rental properties for income. How many advertisements or You-Tube videos have we seen thus far that calls for de-coupling and the purchase of second private property to make capital gains and rental income? 

Please see the following posts:

1. We Make S$280K Per Year And Are In Our 40s. Can We Afford To Decouple And Buy A Second Property? - by "Stack"

2. 9 Strong Points to Why I Say, the Dividend Income Retirement Mindset is Not a Good Retirement Risk Management Model.- by Investment Moats


  1. So what is the good retirement funding solution?

    This is how we planned our retirement funding according to age. We called them income taps and ranked them according to stability and reliability. Gold taps as the most stable /reliable income sources, Silver taps as next reliable / stable sources and bonus taps are sources that are good (bonus) to have.

    We are now 62 and the income taps available to us (for couple):
    Bonus tap 1 (dividend) : $88K (2022 dividend)
    Bonus tap 2 (rental) : $42K (2022 rental)

    Silver Tap 1 (SRS drawdown) : $42.4K (over 10 years)

    Gold Tap 1(OA & SA interest) : $65K (2022 interests earned)

    We planned to start our CPF Life payout only at 70 to allow the RA savings to compound over a longer period.

    And thus by 70, the next gold tap to come on will be our CPF Life payout at $72K pa (Basic Plan).

    We planned our retirement lifestyle on the two gold taps ($68K pa + $72K pa). Incomes from our bonus taps (dividend and rental) will be treated as bonuses to pamper ourselves, buy a car, long holidays etc... but we can live without them.

    Of course, if our bonus taps perform well, we would not need to start drawing out money from our gold taps and let the savings compound further.

    I am still working and all the dividends and rental incomes are reinvested. Likewise the CPF interests are left in the CPF to compound.

    If built up well, the humble CPF can provide two very reliable and stable passive income sources.

    1. Hi Sir, that is a very impressive and inspirational sum of passive stream built up from your different "taps".

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  3. Hi Blade Knight,

    If you are interested, you may want to see my sharing on our investment journey, the good, the bad and the ugly.

  4. You have very fairly described Kyith's article as pointing out the flaws to look out for when adopting the dividend investing approach. In other words, if you pay attention to those flaws (like overconcentration), you can probably do ok with dividend investing.

    1. Hi Hello World, thanks for dropping by. Looks like not easy to maintain a stable passive income stream. I am currently working on diversifying my portfolios which is heavily concentrated in local REITs....seems like the easiest way out is to buy into Unit Trusts or tailored funds by Robo Advisory platforms for immediate diversification.