Thursday, May 16, 2013

Earned a passive income to supplement your earned income

Someone who gives talks on investing told me ....

Singaporeans study hard to get a degree and work hard to earn a salary. They do not know how to invest their savings, so they were unable to earn a passive income, from dividends and interest, to supplement their earned income.

Many of them put their savings in a life insurance policy and gave it up after a few years, losing nearly all of their hard earned savings.

I agreed with him. They do not know their priority and are destined to be poor. They can change their destiny by spending some time to learn about financial planning and investing from the FISCA talks

1 comment:

Chen JY said...

Mr Tan,

The term "passive income" is itself misleading, painting a picture that it is income derived without doing much or any work at all.

Here are some examples of "passive incomes":
1. Earnings from a business that does not require direct involvement from the owner or merchant;

2. Rent from property;

3. Royalties from publishing a book or from licensing a patent or other form of intellectual property, such as computer software product;

4. Earnings from internet advertisements on websites;

5. Dividend and interest income from owning securities, such as stocks and bonds, also referred to as portfolio income.

The first 3 requires significant capital or work.

I believe you're referring mostly to the last item on the list.

IMO, it is not true that such income are really passive.

The investor still needs to put in work to understand and choose what to invest, when to hold, and when to cash out.

And if everybody were to follow your advice and somehow chose the "right" financial instruments/shares/unit trusts etc. to invest their money, it would just dilute the gains for each investor.

I will give you this: if everyone is more financially savvy, it will close the income gap between the rich and the poor - that's all.

Blog Archive