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4-3-2-1 Approach to Financial Freedom

I speak to clients on a daily basis regarding management of their wealth. One common trend I observe is many people aspire to reach financial freedom at some point in their lives, but most are clueless how to get there. Financial freedom is the point in your life when your work becomes an option rather than a means of survival. In this article, I outline some broad strategies on how you can get started along this journey towards financial freedom. The 4-3-2-1 Approach Photo by Jason Hogan on Unsplash One simple rule of thumb I tend to adopt is going by the 4-3-2-1 ratios to budgeting. This ratio allocates 40% of your income towards expenses, 30% towards housing, 20% towards savings and investments and 10% towards insurance. While this is by no means a hard fixed rule, it is a useful guide to ensure you are not over-allocating resources towards any one single area while neglecting the rest. For a young person who has yet to acquire the first property, the 30% for housing

Why REITS deserve a place in your portfolio

Real Estate Investment Trusts or REITs in short were established as an asset class in the US in the 1960s to provide investors a platform to invest in income producing real estate without directly owning the real estate. The asset class was introduced in Singapore in 2002 with the listing of CapitaLand Mall Trust. Since then, many more REITs were listed both in Singapore and the region and the asset class is widely accepted as a staple for investors looking for income. REITs offer income investors a few benefits to other income producing assets. REITs are generally  granted tax benefits where the distribution is tax exempt if the REIT pays out the bulk of their income, typically 90%, to unitholders. REITs also offer more liquidity to directly buying into real estate, where you can easily liquidate your holdings in the capital markets. In this article, I highlight 3 reasons why REITs deserve a place in your financial portfolio. Photo by Swapnil Bapat on Unsplash     "With the reop

3 things to do in a rising interest rate environment

It is no secret we are moving into a rising interest rate environment to combat inflation. While it is debatable how much the US Federal Reserve can increase interest rates before causing the economy to slow down, I think interest rates are generally on an uptrend within the next two years.  Interest rates can affect your financial portfolios in a number of ways. In this article, I will share 3 things you should do for your portfolio in view of the rising interest rate environment. Source: 1. Refinance or reprice your mortgage loan to a fixed rate For most of us, the single biggest impact of interest rate is your housing loan. As interest rates rise, your mortgage interest rate is likely to rise.  If you are on a floating rate and are due for refinancing, you may want to explore refinancing or repricing to a fixed rate package. This will lock in your mortgage interest rate for the next two to three years.  2. Review your budget If you are not eli

3 things to do during a market downturn

The financial markets have been in a correction phase since the start of the year. Many of you are understandably jittery with the ongoing corrections. Market corrections are part and parcel of investing in the financial markets, but that does not stop fear and panic from setting in from time to time when investors are unsure what to do during a market downturn. So in this article, I outline 3 things I think you should do in an ongoing market correction. Credit: 1. Stop looking at your portfolio  Fear is very often the number 1 reason people do badly in investments. Panic selling is a very common phenomenon, where investors tend to sell when the markets are low which is the opposite of what you want to do. If looking at your portfolio in the red induces fear, one of the things you can do is to stop looking at the portfolio. If your investments are fundamentally sound, the markets will recover and your portfolio will likely be fine in the mid to

How to create passive income to fund essential to luxury expenses

Passive income is a key path to financial freedom. While active income allows you to trade time for money, passive income allows your money to work for you. When your passive income outgrows your expenses at some point, technically you are financially free. Sounds simple enough? Source: The challenge for most people is they tend to see passive income as a single source of income. For example, some may invest in dividend stocks and the income from the dividends become a source of passive income. Others may decide to invest in real estate and treat the rental income as a source of passive income. The above is fine, but by concentrating your income stream from a single source, you bear the full downside risk of the asset class.  The recent stock market correction is a good reminder, where a substantial correction in the markets can cause investors to panic. I speak to clients on managing their wealth on a daily basis, most tend to overestimate their

5 Instruments to Build Passive Income

Dividend or income investing has been gaining traction in recent years, particularly with the FIRE (i.e. Financial Independence, Retire Early) movement amongst the younger crowd to build up a passive income stream towards financial freedom. In this article, I highlight some of the main financial instruments you can deploy to build up a passive income stream for yourself. Photo by Jonathan K├Ârner on Unsplash DIVIDEND STOCKS Dividend yielding stocks are a common tool for building passive income. In particular, companies in more stable or defensive industries tend to give out part of their operating profits in the form of dividends to reward shareholders. Dividend stocks tend to be less volatile than growth counters due to the dividend payout providing support for stock prices. As with all stock investing, a good knowledge of stock analysis will give you a better chance of picking out good dividend counters. REAL ESTATE INVESTMENT TRUSTS (REITS) REITs have been gaining popularity in rece