Dear readers, all of us are Wealthier than we thought and we could receive cash beyond our monthly salary. Before I go on, you may be thinking that right here, right now, at the start of a brand new week on a Monday morning in Singapore, I am going to dive deep into what could be seem to be a cliché: the Wealth Mindset as often found in those wealth creation and wealth management literature and you are starting to feel bored, please hold on. For what I am going to share is really something that is important to all.
Indeed, Wealth is really an idea. As investors who you likely are, you should already know. The way you plan your investment, your trades that determine your eventual profit or not are all ideas.
As many of us are salaried employees, I want you to believe that you are actually earning more what the monthly paycheck dictates.
I want you to know that those cash that you would be earning more than your monthly salary would not be coming to you now, but it would be coming to you in the future as you seed this idea of wealth creation.
I want you to know that the more you delay your instant gratification and save more, the more these cash above your salary will be as the wealth idea takes shape.
And I want you to believe that this Wealth Creation is coming closer while you are planning for the manifestation of your wealth plan!
Yes, I am talking about Investing. I am talking about saving up and building up an investment warchest now to take opportunities of the stocks markets meltdown!
To illustrate how this Wealth Plan works. Assume you earn $5,000 a month and have saved an investment warchest of $100,000. Say, in the eventuality of a Singapore stocks markets meltdown, the Straits Times Index (STI) plunged to 1,500 and you invest in the STI through the STI ETF. When the stocks markets return to normalcy sometime later, say to 3,000 level, you will be profiting a cool 100% return $100,000 in capital profit, not counting the dividends that you earn throughout holding the STI ETF.
At this point, your investment would have doubled from $100,000 to $200,000 and assume you sell back the investment to reap back the $100,000 cost of your investment leaving the other $100,000 half still into the investment. Taking a 4% dividend yield, this $100,000 investment will give you $4,000 annual dividends at no capital cost to you (since you have earlier reaped back the $100,000 capital).
So holding on your investment, this $4,000 annual dividend income adds on to your monthly salary. And if you have a bigger pot of capital in the first place to invest, the more dividend income you will get annually.
The above is in a nutshell the adoption of a Zero Cost Averaging Strategy in a stocks markets financial meltdown!