Ps. As usual, non of this is financial advice. Talk to a professional before you spend any of your money.

Family & friends always ask me for financial advice (I really should charge).

So I would put up some things I’ve told them here (mostly so I can send a link rather than explain all over again).

For me, Investment is basically keeping a part of the proceeds of my current efforts so in the future, I can still earn comfortably even while I do nothing.

For Instance,

If I believe to live comfortably when my joints are weak I have to earn $100,000 annually, my investment plan should be investing in assets that would give me $100,000 a year at the point of retirement.

Most people use Real Estate as their investment vehicle with rents received as the income.

Averagely (where you don’t have a real estate bubble), a property you acquire should get you, 5 – 10% of its value annually in rents.

So to meet your target of $100,000 annually, you should have $1,000,000 to $2,000,000 (or more to factor for taxes and maintenance) worth of real estate in your portfolio by the time you retire.

The problem most young people especially have with real estate is, it takes a lot of money usually to play in that market.

• Downpayments for mortgages usually take a relatively huge amount of money,
• Taxes and fees can be a lot,
• Buying outright also means you have to have a lot of cash at hand to close the sale.

For most young people starting their careers, this huge cash outlay is something not readily available.

This is why I’d usually refer them to the stock market as a means of getting started in the journey to maintaining their income level at retirement.

I won’t talk about Capital Appreciation/Growth here (where stocks/property make huge gains over the purchase price) as I see those as a bonus in this strategy and not the goal.

Remember the 5 – 10% annual rent returns I talked about earlier?

You can get the same from the stock market!

When you invest in stocks, you buy a portion of profitable companies you believe in and some of these companies share the profits they make every year to investors in the form of dividends.

For a lot of these companies, the dividend yield (percentage of dividend over stock price) is

If you look through companies on the FTSE 100, currently there are 18 companies you can invest in with dividend yields between 5 and 13%!

This means even if you have access to just $1,000, you can start buying stocks in these companies and saving towards your retirement target and even use the amount you’ve saved for your down payment on real estate (if you still want to go down that route) when you’ve accumulated enough.

I personally prefer stocks as my investment vehicle for the following reasons:

• Liquidity: You can sell your stock in a few minutes/days by placing a sell order, releasing your funds. With property, it’s normal for assets to stay listed for months/years before a buyer comes along.
• Reduced charges: When you own a house, you pay property taxes, bills, pay for renovation/improvements etc. When you own stock, you just pay your taxes.
• Lower capital requirements: This is self explanatory.

I’d stop here as I wanted to keep this below 500 words (failed already) but if you’re ready to get started investing for your old age and cannot afford to play the real estate market yet,

• Search the internet for any complex terms I’ve used
• Make a plan/goal
• Look for a stock-broker (you need one to buy stock)
• Start building your future now.

Till next time.