Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

FI/RE

Tiger Brokers Review

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Filed Under: Dividends, FI/RE, Financial Independence, Investment, Investment Portfolio, Sponsored, US Stocks 2

I have had an account with Tiger Brokers since 2020 but have yet to utilise it apart from trying out their interface and depositing a small amount in there.

If you are looking to trade international stocks and have yet to open an account with Tiger Brokers, you will be glad to know that there are huge perks to opening an account now.

Tiger Brokers Account Opening Referral and Promotion

Account Opening Rewards

  • 1 unit of Grab share
  • Unlimited commission-free trades for HK, SG, and China A-Shares for 365 days.
  • Unlimited commission-free trades for US stocks for 180 days. 

Account Funding Reward (Initial Deposit of SGD1,000 or more + execute 5 BUY trades)

  • SGD88 cash

The full T&C can be viewed hERE. The promotion lasts till 12 October 2022.

Why Tiger Brokers?

Fees

First off, as always, fees. Tiger Brokers’ zero-commission trading is huge and beats many other international brokers.

Now, zero commissions do not mean that trading of US shares is totally free because there is, of course, a platform fee of USD0.005 per share or a minimum of USD1 per trade. It is a fee, but it is cheaper in comparison to many other brokers. So, keep that in mind.

As I’ve mentioned many times, fees are important because they eat their way into your investment and you’ll find yourself paying a lot more than 1% at the end of day, say, 20 years.

You may think a 0.1% or a 1% fee is of no significance but with the compounding nature of long-term investing, we, as average investors, are looking at hundreds of thousands to millions of dollars in our investments at the end of the day.

Regulation and Protection

Tiger Brokers (Singapore) Pte Ltd is regulated by the Monetary Authority of Singapore (MAS).

Elsewhere, they’re also regulated by the SEC in the US, ASIC in Australia and HKSFC in Hong Kong. They’re compliant in all the countries they operate in so they’re safe. Apart from that, customer funds are held in a segregated trust account with DBS Bank Ltd. Custodian of investors’ shares is with the Central Depository (CDP) as well as overseas brokers.

Another important safety factor is that Tiger Brokers is listed on NASDAQ and under the ticker TIGR. This, in my book, adds credibility to Tiger Brokers as a brokerage platform. Their books and reports are easily accessible should you feel the need to refer to them as well.

Rewards

There’s a built-in rewards system for users of Tiger Brokers – Tiger Coins. By completing certain tasks (which aren’t all that hard) you’ll be credited with Tiger Coins which can be used to redeem rewards such as commission-free trades.

Account Opening and Registration

So, you’ve decided to open an account. Two types of accounts are available at Tiger Brokers – Margin and Cash Upfront. I’ll always recommend a cash upfront account to start with. If you’ve been trading and investing for a long time and are confident in your abilities, you can always move up and open a margin account.

Link to register hERE.

Funding Your Tiger Brokers Account

The are many ways to move your funds to Tiger brokers but the best I’ve found and that’ll save you fees in the future is this: You’ll have to open a bank account in Singapore. Basically, you transfer your monies to an SG bank account (you can use services like Transferwise etc to save on fees) and then from there into your Tiger Broker’s account.

Another transfer method to note is to use Wise which is integrated directly into the Tiger Trade APP, as part of a collaboration with Tiger Brokers. This method is fast and easy once it is set up. More info can be found here: https://www.tigerbrokers.com.sg/help/detail/87168024.

What I’ll be Using

Because of Tiger Broker’s low fee structure, I’ll be looking to add a ton of long-term international stocks here. Especially US shares.

Love the rewards I get from trading as well in the form of Tiger Coins.

End.

Account opening rewards are looking good and you get rewards as you trade and invest.

If you’ve yet to sign up and want to, use the registration link hERE. Check out the full details of the promotion hERE.

This post is sponsored by Tiger Brokers.

Carsome Review – My Experience Buying and Selling My Car with Carsome

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Filed Under: FI/RE, Financial Independence, Financial/Life Hacks, Investment, Other, Travel, food and the finer things in life 1

So I bought a car!

I love cars and I’ve never bought a brand new vehicle in my life. The car I just sold off was a 21-year-old BMW e46. I got the car back in 2013 and have been using it as my daily drive.

The reason I had to let go of the car was the cost of maintenance. I had been consistently spending thousands of ringgit a year for part changes and enough was enough. This is why you shouldn’t ever keep an old continental car as your daily drive.

The options available to me were to sell the BMW and get another newer car or sell the BMW and use Grab. I decided on getting another vehicle as I actually like driving and after doing some simple calculations, owning my own car made more sense.

Selling my Car

I had been getting ads on Instagram from both Carsome and myTukar regularly by this time. Went car-browsing on both sites and spent hours sifting through.

Some stuff to take note of, myTukar doesn’t accept cars over 20 years old. Carsome does.

Also, both of them gave me much higher prices compared to the local dealers you can find on Mudah. I predict a swift and timely death to 2nd hand car dealers all over Malaysia soon. They just can’t compete anymore.

So, took the plunge, sold my car to Carsome and got the best possible price (it was still a really shit price) and went browsing for my next car at Carsome.

Buying my Secondhand Car.

For years now, I already knew the brand and car model I wanted (it is a hatchback). And that’s about as much as I’d like to disclose about my vehicle for now.

All I had to do was look out for one that had low mileage and was in good condition. I had already done my research on the car with all the known issues and what to look out for. There were only two real choices for me. The hatchback or the very compact and fuel-efficient Perodua Axia. Also a low mileage and good condition one of course.

I was in no rush to sell the car so I think I spent about a month or two just sifting through and browsing cars on Carsome and myTukar. I had about 6 tabs open on my browser every day on cars. The car I wanted came on sale in January on Carsome. It was the model I wanted and it had done about 50k in mileage. Same models were at 80-100k mileage and priced the same on sites like Mudah.

Made the call, went through the process and paid a refundable deposit of RM1,000 for the car. I had the salesperson bring the car over to KL all the way from Johor for a viewing.

Steps to Buying a Secondhand Car

Now I’m sure there are plenty of resources on buying secondhand cars online you can go through. Heck, some of you here may even be veterans and are better at it than I am. But here is what I did.

1. Inspection

One of the reasons I chose Carsome was for its inspection and checking system. There is a detailed report on the problems found on each car listed on their website.

Despite this, the very first thing I did was bring the car to a friend’s workshop and garage for a full inspection. Did an Onboard diagnostic (OBD) to make sure the car wasn’t tampered with. Paid RM150 for the inspection.

We checked for rust at the bottom and made sure no rust was found on the car’s mainframe. We noticed significant rust on the car’s front right absorber and mounting.

The salesperson from Carsome was a really good one and a friend of a friend. He agreed to have the car sent back to their workshop and to change the parts if there were issues found.

2. Test Driving

After waiting for about a week for the car parts to be fitted, I brought along a very kind friend who was a mechanic for the first viewing and test drive. Let him take the wheel and right off the bat we heard weird sounds coming from the front whenever the car went over a speed bump.

And guess what? It was back to the workshop again! In total, I think I went for 3 test drives because of the sound from the front. Carsome changed: Absorbers, Mounting, Dust Covers, Bearing and even did the alignment for the wheels. At the end of like 4 test drives over the span of a month, there was still some sound coming from the front over speed bumps but it was significantly less, I was already feeling really embarrassed for the back and forth and decided to just go ahead with the purchase. I decided that I will refit the parts on my own time later.

I think only companies like Carsome and myTukar will do this for you. If you’re purchasing from a secondhand car dealer, forget it.

3. Loan Application and Payment

I got the salesperson to submit my hire purchase application to a few different banks, and settled on CIMB as they offered me the lowest rate at 3.1% for a 7-year loan. The loan came with a few conditions.

  1. Open a savings account with CIMB;
  2. Take the first year’s motor insurance with them; and
  3. Snatch Medz for one year.

Snatch Medz is a sort of life insurance where if I were to die or suffer a total disability, the loan would be paid off. This one cost me RM430 for the first year.

Used my credit card for the deposit, had a problem increasing my credit limit with Maybank so I had to delay the purchase for another few days. Managed to get it settled eventually so a tip here is to get a hold of your bank earlier if you’ve already decided on the car. Get your points from the deposit! It is worth it.

Additional Stuff I Asked For

If you’re going to get a vehicle from Carsome or myTukar, don’t forget to ask for additional freebies!

You can check out Carsome hERE.

Change all faulty parts!

Change in parts that were broken. As mentioned earlier, I got a lot of parts replaced. If you’re getting your car from a dealer like Carsome, you should do your inspection and ask for a change in faulty parts. Ask for everything!

Car plate number interchange

I got a discount for the exchange of my car plate number. I bought my own number through JPJ’s auction and had Carsome replace it at a discount. I think it was around RM200 cheaper to do it through their agent.

Promotions

Always remember to check what promos the dealer is having. It so happened Carsome was having a TnG wallet promo and I asked for that.

They were also giving a RM1K discount if you sell your car to them and subsequently buy from them after. I qualified for that and got RM1K off as well.

Petrol vouchers

And after getting everything sorted, I got my guy at Carsome to get me petrol vouchers! I got about RM300 worth of it.

End.

So I’ll most likely be using this car for at least another 10 years. Will be keeping it in good condition. I have still yet to buy a new car for myself. This article has taken a pretty sharp turn away from investing, but hey, buying a car costs money and making a good decision here is vital to investing too.

If you’re looking to sell or buy a car, head over to Carsome’s website. I’ve had a good experience with them. I can even get my salesperson to give you a call so drop me an email or a DM on Instagram.

Aaaaand, if you’ve been following me on Instagram, you would’ve noticed me posting pics of another vehicle occasionally. I invested in an old classic car and I’ll be posting much more about it soon!

A Review of CapBay – P2P Lending in Malaysia

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Filed Under: FI/RE, Investment Portfolio, Other Investments 11

CapBay Referral Code (RM100)

If you’re signing up and registering with CapBay, don’t forget to use my code and link for a free RM100. To qualify, you’ll have to make the RM10K deposit and select one of the Auto Invest profiles (Conservative, Moderate and Aggressive). The full terms and conditions can be found here.

Register hERE.
Use my code: DIVMAGIC

CapBay Portfolio Update

An important note: First started investing in May 2021.

Nov 2022

Still happy with CapBay!

CapBay is also having a few promotions on and off recently so if you’re looking to start investing, make sure to capitalise on that. Also my code above for an additional RM100.

I’ll be adding in a little more money the next time they have a promo.

June 2022

I’m pretty happy and satisfied with CapBay. With the markets in turmoil, CapBay is the one that outshines my other investments for the year at an 11% annual return. A little lower of course once you take into account the fees.

CapBay is also having a few promotions on and off recently so if you’re looking to start investing, make sure to capitalise on that. Also my code above for an additional RM100.

May 2022

Many of you have been asking for an update on my P2P lending portfolio on CapBay. The good news is that there are still zero defaults! And the even greater news is that the annual return is still above 10% right now.

I prolonged the update a little because this month marks the 1 year anniversary of my investment in CapBay. We put in RM10K back in May 2021. And now, we’ve got a net return of RM780.51. That is a 7.8% return. Not too shabby compared to the markets now.

In light of the decent returns and zero defaults, I’ll be placing another RM10K into CapBay. I wish I could spare a little more but I don’t want to spread myself too thin.

If you’re thinking of giving CapBay a try, register hERE.
Use my code: DIVMAGIC and get RM100 for freeee.

Read on for the step-by-step guide to register and how to choose your portfolios.

January 2022

I invested RM10,000 in CapBay back in May 2021. The first update (as below) was in September 2021 in which I got RM262.77 back, amounting to a 2.62% ROI in 5 months.

Fast forward to January 2022, from the same RM10K in investment, we’ve got a net return of RM525.15. That’s a 5.25% return in 8 months.

Not sure if we’ll be able to reach 10% in returns at the end of one year. But we’ll check back again in May 2022! Still pretty happy with the returns AND of course, no bloody defaults.

If you’re thinking of giving CapBay a try, register hERE.
Use my code: DIVMAGIC and get RM100 for freeee.

Read on for the step-by-step guide to register and how to choose your portfolios.

September 2021

I invested RM10,000 in CapBay back in May 2021. Here’s how the portfolio is doing almost 5 months after.

I’ve gotten back RM262.77 which was of course reinvested again. That comes up to about 2.62% ROI in 5 months. It does seem a little low right now but bear in mind that due to the nature of financing, it’ll take a few months for each note to mature. We’re looking at an average time period of 6 months per note. Below is an example of a note that took about 2 months to mature.

For now, I’m happy with the 2% return in 5 months. And I’ll probably keep the money in for 1 year or maybe 2 then re-evaluate CapBay’s performance.

The best part, however, is the zero defaults so far. That has always been a concern when investing in P2P lending. With no defaults in 5 months, I’ll be continuing with CapBay for the foreseeable future.

The P2P Lending Scene in Malaysia

I’ve been receiving inquiries on and off on what P2P platform I’m currently in. And if you’ve been reading the blog for a while, you’d know I had some money in Funding Societies. However, due to their increasing defaults, I’ve pulled out most of my capital.

Over the past few months, I’ve been looking to re-invest in the sector. I’m on the lookout for lower risks and default rates, somewhere my money can grow steadily at a reasonable rate of return. Which lead me to CapBay.

Types of Loans – Business Term vs Invoice Financing

During P2P’s infancy days, the loans offered by most platforms consisted of mainly business term loans. Which is, of course, the essence of P2P financing i.e. You lend money directly to businesses for a fixed period, typically between 12 to 36 months.

However, it is when the defaults came in that investors realized just how risky it was to hand out loans willy-nilly. And of course, the importance of really diversifying and not putting your capital into a few loans. Instead, when it comes to P2P financing, diversifying over many loans is advisable.

Fortunately for me, my returns today are still in the positive region. I’ve almost withdrawn 100% of my capital with a net return of 10+% per annum.

Right now, I’m looking to get back into the P2P scene as the industry as a whole matures. And I’m looking to lower my default risk by going for primarily Invoice Financing. There is lower risk here because investors are essentially lending money in the short term to SMEs based on a transaction.

In short, when an SME sells their services to a buyer on credit, they often must wait up to 6 months to get their payment. Invoice Financing allows these SMEs access to upfront payment. With Invoice Financing, the SME has already made the sale and the risk of default is actually transferred to the corporate buyer. Typically, Invoice Financing is for the short term, you’ll normally see a loan term of not more than 6 months.

Why CapBay?

CapBay specializes in providing Invoice Financing to SMEs who supply to blue-chip companies and government-related entities. Among the few P2P players in Malaysia, CapBay currently has had no defaults SO FAR since their launch in February 2020. This is no easy feat and caught my attention right away and got me digging for more info about them.

As reported by Fintech News Malaysia, CapBay is the fastest platform to hit RM100 million in P2P Financing. Typically, fast growth leads to problems with risk. The fact that they’ve managed to achieve this growth while still maintaining a 0% default rate is impressive.

How CapBay Works

CapBay works a little differently from the platforms I’ve used. They’re encouraging ”Auto-investing” whereby you let the platform pick the loans to invest in. As you all know, I’m a big fan of automating investments and so I will be using their Auto Invest feature all the way.

You choose from 3 different Auto Invest Profiles based on their respective risk profiles and potential return – Conservative, Moderate and Aggressive. If however, you want to have better control of your capital, you can choose to customize.

Within these 3 different profiles, you’ll find a further 3 categories of notes:
1. Select: Safer and lower return notes
2. Motor: Dealer financing notes
3. Diversified: Riskier and higher return notes

There’ll be a section for you to read up on these on the platform itself.

Another thing to note: Your uninvested funds will earn an estimated 1.7% per annum. This is a special feature called CapBay Plus that ensures you continue to generate returns on uninvested funds if you utilize their Auto Invest.

Simple Steps to Get Started

CapBay Registration P2P

You’ll need RM10,000 to start

This one here got me thinking a little and I know RM10,000 is a huge amount to start with for many, myself included. But after looking at the 0% default rate for a year, as well as the expected net return of up to 10% per annum on their investment opportunities, I’ve decided to go ahead. I’ll be posting updates on the performance here, probably on a regular basis.

Registration

CapBay Registration

Registration took me about 5 minutes. All the usual KYC are required. I.e. pics of your IC and a 5-sec video upload.

If you don’t have a webcam, make sure you download the app and register there as you’ll need to upload a video during registration as part of their KYC requirements.

CapBay Referral Code

And finally, if you’re signing up and registering with CapBay, don’t forget to use my code and link for a free RM100. To qualify, you’ll have to make the RM10K deposit and select one of the Auto Invest profiles (Conservative, Moderate and Aggressive). The full terms and conditions can be found here.

Register hERE.
Use my code: DIVMAGIC

End.

My Portfolio

CapBay Registration P2P

I’ve added in RM10,000 to the Auto-Invest feature and selected the Aggressive profile.

This image has an empty alt attribute; its file name is image.png

The Auto-Invest feature was quick and my funds are 40% invested in a few days. Returns range from 7.3% to 9.7% currently.

Look forward to future updates to my P2P portfolio.

Risks of P2P

Please understand that I consider P2P investing a high-risk venture. Even with CapBay’s focus on Invoice Financing, I still consider this to be a risky investment. But how else can you expect a potential net yield of up to 10% per annum.

This is why I’ve been doing a lot of research and looking around the Malaysian market. I’ll be testing the waters with CapBay and will let everyone know how it goes via my updates.

Dividend Magic’s Yearly Review

By
Filed Under: FI/RE, Financial Independence, Investment Portfolio 0

I’ll be using this anchor page to keep track of my overall investment portfolio. Updated yearly so I’ll be able to track and show a yearly gain/loss.

Moving forward, I’ll aim to keep my recording simple and clear-cut. So I’ll be able to track my yearly gain more easily. No more IRR, just simple yearly gain, including fresh capital and dividends reinvested.

The Year 2021

It has been a turbulent year. In terms of my portfolio, it has more or less stayed the same, which I am grateful for. The first half of 2021 saw prices plunge and then go up again in the latter part of the year.

My dividends have also increased ever so slightly to RM15,595.07 per annum in 2021. This is despite me having a smaller portfolio compared to 2020. Which is a win. Still, a long way to go to RM36K a year in dividends.

I’ve also managed to maintain a respectable savings rate in 2021 despite a drop in my income. Got a sizeable war chest ready to be deployed and I’m keeping an eye on a few local stocks as well as US ones. It has been a while where the Freedom Fund has been stagnant around the RM500K mark.

On the other hand, my crypto portfolio almost doubled in value from a year ago, this is after factoring in the huge year-end dip. I’ve also been consistent in putting money into my StashAway account. Returns have dropped compared to last year, but in the long run, I’m confident. My US portfolio has seen a drop come year-end, but we’re still positive.

My Investments

The Freedom Fund

Market value: RM501,858.09
Cash: RM100K
Dividends: RM15,595.07
Dividend yield: 3.33%

The Freedom Fund (US)

Crypto Portfolio

Gross investment: RM10,273
Market value: RM67,004
Capital gain: +552.23%

StashAway

Dividend Magic – Risk (36% Risk Index)
Gross Investment – RM48,000.01
Current Value – RM48,575.13
Time-weighted return – 10.19%
Money-weighted return – 2.79%

Dividend Magic US – Risk (30% Risk Index)
Gross Investment – RM10,000.00
Current Value – RM11,433.23
Time-weighted return – 14.33%
Money-weighted return – 14.33%

StashAway Simple
Gross Investment – RM4,500.00
Current Value – RM4,769.28

TOTAL
Gross Investment – RM62,500
Current Value – RM64,777.64
Gain/Loss: +3.64%

My Overall Investment Portfolio

Freedom Fund: RM601,858.09
Crypto: RM67,004
StashAway: RM64,777.64
Total: RM733,639.73

Goals for 2022

I will focus on getting my dividends up. I’ll be adding more positions throughout the year. I’m looking at you Scientex!

Also, will be looking to do a monthly DCA into Vanguard’s S&P 500 ETF. As of now, I’ll be purchasing it through Rakuten Trade until a better brokerage becomes available.

The Year 2020

What a year it has been. My portfolio tanked in March when Covid hit. It even went into the red, a first for me. I missed the glove boat.

Bet on the recovery and my portfolio managed to sail through 2020 with an almost 10% gain y-o-y. As the portfolio increases in value and diversification, long gone are the days of 15-20% capital gains. I’ll be aiming to rebalance and refocus my portfolio next year. Cutting underperforming stocks and adding more winners.

I’ll also be focusing on my US portfolio moving forward. I’ve also made a decision to keep my US portfolio hidden to maintain some form of privacy. Don’t worry you’ll still be able to view it in percentage (%) form.

My Investments

The Freedom Fund

Market value: RM545,778.21
Cash: RM46,350.83
Dividends: RM15,415.64
Dividend yield: 3.33%

The Freedom Fund (US)

Crypto Portfolio

Gross Investment: RM13,808
Market Value: RM34,424
Capital Gain/Loss: +149.30%

StashAway

Dividend Magic – Risk (36% Risk Index)
Gross Investment – RM14,001.00
Current Value – RM15,378.03
Time-weighted return – 8.01%

Dividend Magic US – Risk (30% Risk Index)
Gross Investment – RM10,000.00
Current Value – RM10,603.19
Time-weighted return – 6.03%

StashAway Simple
Gross Investment – RM12,500.00
Current Value – RM12,559.17

TOTAL
Gross Investment – RM36,501.00
Current Value – RM38,540.39
Gain/Loss: +5.6%

My Overall Investment Portfolio

Freedom Fund: RM607,544.68
Crypto: RM34,424.00
StashAway: RM38,540.39
Total: RM679,125.07

Goals for 2021

The Freedom Fund and StashAway performed solidly for me in 2020. Obviously, I’ll want to see my dividends go up in 2021. It dropped a little this year with a few companies in my portfolio electing to withhold dividends.

I hope to see dividends surpass RM20K per annum barring any unforeseen circumstances.

Also, I want to eventually have my total investments (excluding my US portfolio) reach RM750K in 2021 and RM1 million by 2025. Setting the bar a little low there I know but I’ve learnt that the key to happiness is low expectations. And with RM1 million in investments, I should be able to hit my dividend target of RM36,000 per annum.

On the other hand, I will also be pumping money into my US portfolio (which as mentioned above will be tracked only in %).

Now, to the best performing asset for me in 2020 – Bitcoin and Ethereum. Almost at a 150% return for me at the time of writing and it is increasing. I set out to keep crypto to a maximum of 10% of my portfolio. I’ll continue to hold onto them coins for now.

dividendmagic.com.my

I consider every one of you reading as a stakeholder of Dividend Magic. So an update of the website at the end of 2020 would be apt.

As mentioned on my About page, at the rate the blog is growing, we will definitely be hitting a million (and more) views next year. A big thank you to everyone that has been frequenting the blog and interacting with me on social media. I appreciate every follow, like, comment, and share you’ve been so generous with. I love the community we’ve built and the friends I’ve made along the way. We’re a small but tight-knit bunch in Malaysia.

If you haven’t already, follow me on Facebook, Instagram, and now YouTube to keep up to date.

To those that have been wondering if I’m making money via ads on the blog, the answer is finally a yes. But it isn’t much, unfortunately.

I’ve opted for the minimum amount of ads as well as the best-optimized placement for readers.

Right now, ad revenue itself is able to cover the running costs of the blog which I’m super grateful for. I don’t see this growing significantly, maybe I’m doing something wrong with the ads. With running expenses covered, Dividend Magic will be here to stay.

End.

Dividend Magic - We can do it!

That is all there is to update. 2020 was scary, thankfully, my investments are doing all right now. As always, it is important to stay invested and to attack when the opportunity presents itself. There will of course be some missed opportunities and lessons to be learned along the way. All my mistakes, all my wins, you’ll be able to see them here on the blog.

I’ll be updating my portfolios on a monthly basis as usual come 2021. Have a happy new year and I’ll see everyone in 2021.

Financial Independence, Retire Early (FI/RE) Guide for Malaysians

By
Filed Under: FI/RE 6

Financial Independence, Retire Early (FI/RE) is a movement dedicated to savings (sometimes extreme) and investment that allows its followers to achieve financial freedom and early retirement far earlier than traditional retirement plans.

Some proponents of the FIRE movement have retired as early as age 30, instead of the conventional and agreed upon retirement age of 65.

Steps to Achieving FIRE

In recent years, I’ve seen more and more Malaysians embracing the FIRE movement, especially the millennials.

Of course, many of us are still striving to achieve financial independence, myself included. My aim is to achieve this by the age of 35. Below are some of the steps I’ve taken.

1. Saving

There are no shortcuts here. My savings rate has always been high and well above the average Malaysians. In the first few years of being in the traditional workforce, I saved like hell. I detail how I built my investment portfolio through frugality hERE.

Asians in general are predisposed to saving from the onset. I think most families cultivate savings as a habit from a young age and that alone will set us apart from other cultures. Saving alone, I think, accounts for 50% of your FIRE journey.

Emergency Fund

Saving and your emergency fund goes hand in hand. The first step is always to build a fund for emergencies. Steps and how I structure my emergency fund can be found hERE.

An emergency fund helps in two major ways. Firstly, it gives you peace of mind. And secondly, if and when an unexpected financial crisis occurs, you won’t have to liquidate your investments to cover those costs.

Having set up my emergency fund, my next step was investments.

Debt

I’ve been fortunate enough to get out of my education debt early thanks to wonderful parents.

Another huge debt hurdle I foresee Malaysians encountering in their lifetime is of course your mortgage. Two ways to go about this, either factor in your mortgage repayments into your annual expenses, or if it is cheaper, rent. If you’re lucky to have your parents leaving and bequeathing you the family home after they’re gone, you’re set in this department as well. Just make sure to take care of them.

Other debts such as credit card and personal loans, stay clear of them. If you have them, pay them off at once, then start on your emergency fund.

2. Grow Your Money

There are a 101 ways to grow your money. The path I’ve chosen is to invest in stocks. You may find that you have superior knowledge in other assets like real estate. Or you may prefer to put your money in robo advisors like StashAway. To each his own I say. As long as you’re investing in something that is an asset.

By investing in stocks, my money will grow in two ways.

a) Capital Gains

A capital gain is when my stocks increase in value. For example, purchasing Nestle 2 years ago for RM70 per share. Today, that same share is worth RM140 per share, giving me a 100% or 2X in capital gain in two years.

The same can be said for real estate. Purchasing a residential property at RM100K 5 years ago, you may sell it for RM200K in today for the same 100% gain in five years.

b) Passive Income

A whole article can be written on passive income alone. Which is just what I did and you can read about it hERE.

To keep it simple here, passive income is income I receive without having to put in effort or work for. Through stock investment, I get passive income via dividends. As a real-life example, I received RM16,322.26 in dividend income last year from my Malaysian stock portfolio – the Freedom Fund.

Another example of passive income using real estate as an example is rental. The rent you receive from your tenants can be considered passive income as well.

Your FI/RE Amount

The amount everyone is aiming for to FIRE is actually different. It depends on your monthly expenses. If you’re able to live on RM1,000 a month, you can achieve financial independence and retire at a much earlier age with a much smaller amount in the bank.

How I Calculate My FI/RE Amount

As a general rule of thumb, you want to have 30X your yearly expenses in the bank, the dollar amount most people go by is RM1 million. For me, I’ve calculated my annual expenses to about RM36,000. And 30X that amount is RM1.08 million.

This of course is my own personal amount, no family as of yet. For those that are worried about inflation, I believe that a good investment portfolio will negate the effects of inflation.

Using mine as an example, investing in consumer stocks like Nestle and real estate like REITs, inflation is taken care of by these businesses themselves. Ie. Nestle will raise prices to keep up with inflation. And REITs like IGB REIT would definitely increase rental rates as the years go by.

If you however are just saving your money in FDs, you will have to account for inflation. So make sure your portfolio is invested in the right assets.

The First 100K

However, I’ve found it to be much easier to break down that RM1 million goal. Start with the smaller and (in my opinion) much harder to achieve goal of RM100K.

This is how I achieved my first RM100K.

After getting that RM100K, RM1 million becomes much, much easier. Snowballing from RM100K to a million is much easier than from zero to a 100K.

The Different Types of FI/RE

I know I know, they confuse the hell out of me as well.

Fat FIRE

So Fat FIRE is the best FIRE of all. You’re basically living it up post retirement and enjoying it to the fullest.

You’re able to survive without a job as your passive income more than covers ALL your expenses, not just your basic ones. It is of course the best way to retire, but also the hardest to achieve. You’ll have to be earning a lot as well as having a high savings rate.

But come post retirement, think extravagant getaways, a beautiful home, no more worrying about paying your bills.

Lean FIRE

This is the opposite of Fat FIRE where you basically cut your expenses as much as you can. If you’re prepared to lower your standard of living to the bare minimum post-retirement, Lean FIRE is for you.

People hop onto the Lean FIRE wagon when they realise that they aren’t able to save that much and/or time is running out. Also, if you prefer to spend your younger years enjoying and living a minimalist lifestyle after retirement, you may want to look into Lean FIRE.

Pros and cons here, if you’re absolutely all right with a minimal life, Lean FIRE is the way to go. You don’t need to save up as much for your retirement. It is a significantly lower amount. Also great if you don’t want kids.

Barista FIRE

This one here is pretty new to me. It is what’s between Fat and Lean FIRE. It basically means taking on a part-time job to supplement your income.

Thereafter, depending on how your investments do, you make a more informed decision moving forward. For example, if your stock investments do well over the next 3 years, and you’re able to achieve Fat FIRE, by all means, quit your part time job.

Protecting Your Money

What happens now that you’ve achieved 30X your yearly expense?

You’ll want to protect and continue to grow my money. Some proponents of FIRE actually stop growing their money at this stage. Instead, opting to make small withdrawals (typically 3%) a year.

Personally, with stocks, I aim to continue growing my portfolio from a million to much more. Retiring early isn’t a part of my plan.

Regardless, you will want to protect your wealth by diversifying your money into less risky assets now. At this stage, I would start moving my stocks and building a more defensive portfolio. I’ll focus on maintaining my dividend income as well as preserving my portfolio’s value. No more risky bets at this stage.

How Long Will the Money Last?

If you can get to 30 times your annual expenses, technically, that is enough for you to live off – forever.

With prudent management of your wealth at this point, trust me, you’ll be able to live off that portfolio for a long time. You may even have some leftover for the next generation.

FI/RE requires discipline and letting time work in your favor. Which is why starting early on your savings and investing is so important. Just keep at it and in no time, you’ll be living off your passive income.

If you’re interested in the concept of FI/RE and want to mingle and exchange ideas with like-minded people, we have a Facebook group hERE. To those that have already achieved FI/RE, please do join us and share your journey.

As always, Facebook and Instagram. Keep up to date and help support the blog by following and sharing. Thank you!

Passive Income in Malaysia

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Filed Under: FI/RE, Passive Income 2

Readers of the blog will be familiar with the term passive income. And to once and for all give my point of view on what is actual passive income as well as my own passive revenue streams.

What is Passive Income?

The notion of having your money work for you, to have it generate additional income while you sleep is a wonderful one.

Right off the bat, let me dispel the notion that passive income is only for the wealthier individual. In fact, passive income is for anyone and everyone. Regardless of the amount, passive income is passive income. RM10 a month is a passive income if your assets are generating it for you. Everyone starts small. In fact, I think my first dividend received was in the region of RM50 for the first year. That’s like RM4 per month. Work on it continuously and trust me, it’ll grow.

More popular forms of passive income in Malaysia include rentals from real estate, interest from bank deposits and P2P lending, and dividends from stocks and businesses.

”Passive Income”

The term Passive Income has been thrown around and mentioned a lot recently as Malaysians become more financially literate. In general, passive income is defined as income earned with little or no effort. So not all ”passive income” is truly passive.

For example, almost everyone would list their rental income as passive. I beg to differ. In my experience, taking care of your rental property takes time and effort. You may have a real estate agent working with you at the start but most of the time, you’ll be doing the work yourself. Personally, I put up ads on my own as I feel my agent’s ads were too generic. I even attend the viewings to make sure the said agent is doing his/her job right.

Now all that is just to get your unit rented, what happens when a pipe bursts or your air conditioners malfunctions. Your agent isn’t going to help you with it as there’s nothing in it for them. So no, I’ll not list my rent collection as a passive income.

However, your rental income will be classified as passive once you hire a proper property manager where he/she is hired on a full time basis to take care of your real estate portfolio. Of course, you’ll have to have a large mix of properties before that is viable.

My Passive Income

passive income malaysia

I myself like to only call a source of income passive when it truly requires zero to minimal effort on my part.

This is why, out of all my income streams, I only actually consider my dividends from stocks and interest earned from P2P lending passive income. 

A good benchmark to know if your passive income returns are up to par would be your fixed deposits with banks. Historically, it has been at the 3% mark. Recently, a 2% return is the norm. So if you’ve already got investments generating passive returns for you, check if it’s higher than your FD rates. I’d even go so far to say that FDs are like the kings of passive income. Easiest to obtain, all you need is capital.

My income right now comes from the following:

  1. Salary
  2. Stakes in businesses
  3. Rental
  4. Dividends
  5. Interest

Earned income from working a job is the total opposite of passive income. My businesses, although can run by themselves, I still consider them not to be truly passive because they still require constant monitoring and checking in with.

As mentioned earlier, rental income from my properties does not fall under the passive category for me. My properties require attention from time to time in the form of rent collection, having to look for tenants, fixing stuff etc. So, not passive. For me at least. Until I hire a property manager.

Dividends from my stocks I totally consider passive because the valuation of a company is done once before I purchase the stock. Thereafter, I only check in with the same company either quarterly, half-yearly or sometimes even once a year. 

Lastly, my income in the form of interests comes mostly from fixed deposits and lending money via P2P lending platforms. FDs are a no-brainer, you can even make placements online nowadays. As for my P2P lending, although small in comparison to my other income, this one is passive for me as well. I just read the prospectus and information on the company/business I’m lending money to, and then sit back and receive my money in the form of capital plus interests.

My main source of passive income comes from dividends generated by my Freedom Fund. To achieve financial independence, I’ve calculated that I’d need roughly RM3,000 a month in passive income.

Last year’s dividends came up to RM16,322.27. I’m almost halfway to my goal of RM36,000 in dividends per annum. My dividends so far for the year 2020 can be viewed hERE.

How to Generate Passive Income

Earning any form of income boils down to two factors – the effort and time and/or the amount of capital you put in. In essence, either you invest and put up your time or you put up your money.

So if you’re young, you’re able and you’ve got time to spare, you will want to consider putting in your time and effort towards building a steady stream of passive income. A good example of this would be someone in their 20s working their ass off in a business with the eventual goal of automating it and generating returns without their involvement.

Or, that same 20-year-old person could work at their career, save their salary, and then invest that money to then eventually earn passive returns. Which means – time and effort first, and then putting up the capital after.

Unless you’re fortunate to be inheriting wealth, you’ll always have to put something up for returns. Your effort, your time, your money.

Getting to where I’m at hasn’t been an easy ride. My portfolio is mainly built on frugality. In my experience, passive income does not come easy. It’ll take a huge initial investment on your part. In the case of my dividend income from stocks, to earn that RM16K per annum, I had to have about RM400K in capital which comes up to about a 4% return for me.

Why is Passive Income Important

If like me, you’re on a quest for financial independence, passive income will cover your expenses. Financial freedom and security has always been my ultimate goal.

When I invest, I invest to first increase my passive income. And when I’ve eventually reached my passive income goal, I’ll focus on growth. Because that is when I’m set and I can afford to take bigger risks with my investments. Also, I’d rather not liquidate and sell my stocks for income.

With a steady, reliable source of passive income generating for you every month, trust me, you’ll be in a very happy place. Investment decisions can be so much more logical and less emotional. You worry less about losing the shirt off your back if your investments don’t work out. Of course, being a rational investor you’ll still exercise caution, you just won’t be hindered by thoughts of bankruptcy and worst-case scenarios.

Passive Income Ideas

If you’re like most readers of the blog, you probably are in your 20s or 30s, and you’re working for a salary. You might want to first consider putting in FDs, and then maybe stocks for dividends.

Another way to go is properties, it may not be passive for now. But once you’ve built up a substantial real estate portfolio where hiring a property manager is viable, it most definitely will be passive then.

One more potentially lucrative endeavor are businesses. You may have a hobby right now which can be turned into a side hustle and eventually into a full-fledged business. Or if you’ve got the dough, look into franchises that do not require your full attention.

I’m always trying to find other ways to generate passive income for myself. Some good ones come to mind like royalties from book publishing, music, or any kind of intellectual property.

The blog itself is earning a little from ad revenue and affiliate marketing. This however isn’t passive YET. I don’t want to bombard you guys with too many ads on the site. And affiliate marketing only happens when I actually like and/or use the products. Right now I’m just really enjoying writing and having a community built on investing and FI/RE.

Now, as you can probably tell, not everything may qualify as passive at first because it requires a tremendous amount of effort. But at the end of the day, say 10 years down the road when you’re able to be hands-off and collect your cash, it’s most definitely passive.

A Few Closing Thoughts

Passive income for me is tied closely to my goal of financial independence and freedom. And I’ve decided on dividends to be my main stream of income. You may have other ideas for passive income and your goals might differ. At the end of the day, we can all agree that passive income is a good supplement to your portfolio whatever your financial goals might be.

Ever since I graduated and started my first job, I’ve worked towards a goal – having a stock portfolio whose dividends I can live off for the rest of my life. So, if you haven’t already, set yourself a target and work towards it. Don’t just work that 9 to 5 job aimlessly. Your goal could be like mine, financial independence. Or maybe you truly find happiness in living a lavish life. There isn’t anything wrong with either one. A goal is a goal, as long as you have one and you’re happy, by all means!

For the next article of the FI/RE and Savings Series, check out article 004 – Emergency Funds & Fixed Deposit Laddering.

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