Charlie Munger of Berkshire Hathaway has said that accumulating the first $100,000 from a standing start, with no seed money, is the most difficult part of building wealth. Making the first million was the next big hurdle. To do that a person must consistently underspend his income. Getting wealthy, he explains, is like rolling a snowball. It helps to start on top of a long hill—start early and try to roll that snowball for a very long time. It helps to live a long life.
My First RM100K
I achieved my first RM100K in portfolio market value in the mid of 2014. It took me almost three years to get to that point, starting with RM3,000 I saved for 3 months which I deposited into my Jupiter Securities brokerage account in 2011. Learn how to start investing in shares HERE.
What did it take to get from RM3,000 to RM100,000 in three years?
Well, a lot of hard work, persistence, consistent savings and investing.
I lived below my means day in and day out for years on end. I made a decision to continue living with my parents instead of getting my own place as the property prices were skyrocketing when I first started work. At lunch, I walked out of the air-conditioned premise to a nearby economy rice (‘chap fan’) stall when my colleagues ate at posh restaurants. I couldn’t bring myself to spend RM20 ++ every meal at the office. When I had to stay back to work late, I settled for Maggi and ramen noodles at the office.
Meanwhile, I also put myself in a position to become promoted at work and generate additional income. And I would come home after working for 10 hours to study stocks and try to create additional income above and beyond what my day job provided. I made it a habit of analyzing and looking at at least one new stock every day. I read books and listened to audiobooks on investing during my commute.
I thought about escaping the miserable rat race every single day.
And, perhaps most importantly, I religiously invested all the excess capital generated by living below my means into high-quality dividend growth stocks that rewarded me as a shareholder with growing dividends that allowed me to continue rolling my snowball at an ever-greater velocity.
Sticking To The Plan
What have I been up to since hitting the first RM100K?
What else would I be up to other than sticking to the long-term plan?
My main asset and focus will always be stocks because it is what I understand and what I know.
And if you need a financial plan for yourself, I’ve got one right hERE for you.
I still live with my parents, even though I now own 2 properties which I’ve decided to rent out. I make it a habit of packing food from home whenever I can. I still choose to order the RM10 lunch set instead of the RM20 one.
And although I’m not eating that much instant noodles anymore (my body told me when enough was enough), I’m also not eating steak and going for buffets daily.
I do however find the time to treat myself to a nice meal or holiday now and then. Of course, all of these are within the budget I set for myself.
Now and Beyond
What has all this modest living, saving, and intelligent investing done for me?
Well, my Freedom Fund closed at RM254,3482.62 in total market value on 31 December 2015. My modest portfolio produced a 2.97% dividend yield or RM7,544.14 for 2015.
Update (7 March 2017): As at 31 December 2016, my portfolio has a market value of RM345,955.92. That’s almost RM100K a year for me. With the help of compound interests as well as some diligent investing, I hope to keep this RM100K a year trend going.
Update (1 August 2019): As of 30th June 2019, the Freedom Fund is worth RM439,286.24. Netting me a dividend of RM8,938.36 in the first half of 2019.
It’s yield? 2.46%. I know I said RM100K a year back in 2017, I lied.
I’ve certainly also picked my fair share of duds along the way which has needlessly delayed my progress. But hindsight is 20/20, unfortunately.
Nonetheless, this is a real-time and real-life journey. No backtesting. No hypotheticals. No what-ifs, coulda’s, shoulda’s, or woulda’s. Real-life progress, for better or worse.
And I think that’s what I really love about showing how financial independence unfolds in real-time with all the victories and setbacks that occur. It shows that it’s possible without nailing the perfect investment. Mistakes can be made. We can fall down. But as long as we get back up and keep climbing, we can reach the top of that mountain.
And I’ve been climbing, guys. For five straight years, I’ve been climbing. I know the view at the summit will be incredible. And because of that climbing, the portfolio is now hovering at RM250,000. It’s incredible!
But, as Munger said, it helps to start early and roll for a long time. I didn’t start particularly early. I was almost 21 years old before I opened a brokerage account. But here I am at 26 years old, controlling a portfolio worth RM250,000 that’s chock-full of high-quality businesses across a spectrum of industries. I’m a real estate tycoon. An investment banker. A manufacturer. An insurance giant.
And these businesses will funnel ever-growing cash flow into my portfolio, which begets more cash flow in the future. That passive dividend income should exceed RM8,500 this year. And I haven’t even been rolling the snowball all that long.
Imagine what’s possible in five or ten years? Imagine what’s possible for you in five years?
What has your experience been? Was the first RM100K the hardest? Are you rolling your own snowball? Are you climbing the mountain?
Cheers and thanks for reading. I will continue updating this post on an annual basis just to keep track of my progress from the first RM100K to my first million.
I’ve got too many people asking how I got a RM100K jump just from investment etc.
Now, I hope everyone is clear that me getting my portfolio to jump by RM50K, sometimes RM100K a year is not 100% from investment returns. I pump in money from savings.
I have a regular income and I have a business income. So what’s important here, and what I want you to focus on, is my savings rate, my dividend yield, and my portfolio’s IRR.
All of the above metrics are on the first post of my Facebook page and I also update these in my annual reviews.
You may not increase your portfolio by tens of thousands, but your savings rate, your yield is what that matters. If you have a RM10,000 portfolio, with a 10% yield and you save 50% of your income. That’s a huge win. Focus on the right metrics.