A recent survey conducted by SingSaver has uncovered something interesting.
Half of Singaporeans surveyed plan to retire before the official retirement age of 62, and nearly two-thirds of them started to build their wealth before the age of 30.
The pandemic caused around 30% of the respondents to adjust their plans as the uncertainty caused them to realise the importance of saving and investing.
Despite their eagerness to invest, most have not forgotten how to save for a rainy day.
Seven out of 10 of the respondents saved 30% of their monthly income, and this habit is a useful one for building resilience during times of stress.
Saving money also provides you with the means to inject cash into the stock market at periodic intervals to grow your wealth.
If you have not thought about how you plan to retire, here’s a roadmap on how you can do so.
Invest in growth stocks
Saving money is a start, but it is not enough.
As investors, it’s important to focus on growing your savings above the rate of inflation.
Inflation is a persistent beast that will chew away at the value of your money and slowly erode its spending power.
The way to beat inflation is to channel your money into growth stocks.
Growth investing is one of the proven ways to generate a consistent return that not only trumps inflation but ensures that your investment portfolio grows at a healthy clip.
Businesses that latch on to sustainable trends and well-defined catalysts can help to grow your wealth over the long term.
Blue-chip companies such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Starbucks (NASDAQ: SBUX) have demonstrated their ability to defy the odds and continue posting growth during downturns.
By allocating your cash to reputable businesses, you can enjoy steadily growing capital gains that will enrich you in many years to come.
Generate a stream of passive income
Aside from growing your portfolio, you can also create a steady stream of passive income to support your lifestyle and pay for expenses as you grow older.
Remember that once you call it a day, your earned income source dries up completely and you will have to rely solely on your savings and investments to get through your golden years.
Cryptocurrencies may be all the rage today, but prices are also volatile.
If you are looking for consistency that can outlast your lifetime, dividend stocks are a good choice.
By investing in dividend-paying stocks, you can generate a steady stream of passive income that will help you to sustain your retirement.
An example of an asset class that pays out consistent dividends is REITs.
REITs are bundles of securitised real estate assets that are required by law to pay out at least 90% of their earnings as a distribution.
Such a requirement ensures that unitholders receive a regular stream of cash flow over the long term, thus qualifying REITs as a viable source of passive income.
REITs such as Parkway Life REIT (SGX: C2PU), Mapletree Industrial Trust (SGX: ME8U) and Keppel DC REIT (SGX: AJBU) have paid out rising distributions over time.
Another option is for you to invest in non-REIT companies that pay out quarterly dividends, ensuring that cash flows into your bank account once every three months.
Companies that do so include Singapore Exchange Limited (SGX: S68), iFAST Corporation Limited (SGX: AIY) and UMS Holdings Limited (SGX: 558).
We have identified two areas where you can deploy your capital.
However, it is not enough to know where you can allocate your money.
It’s equally important to remain disciplined and to be steadfast in injecting capital into both growth and dividend-paying companies.
To allow compounding to work its magic, you must have the fortitude and patience to invest over the long term.
Make no mistake: volatility and sharp share price swings will be the norm rather than the exception.
But if you can sit still through these bouts of sentiment-driven rises and falls, you will get to savour the tantalising fruits of your efforts.
Get Smart: Early retirement is within reach
It’s not such a far-off goal to retire before 62.
Many Singaporeans have already started preparing for the long journey, and so should you.
By harnessing the power of compounding through investing in both growth and income stocks, you can bring yourself much closer to your dream retirement.
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Disclaimer: Royston Yang owns shares of Apple, Starbucks, Mapletree Industrial Trust, Keppel DC REIT, Singapore Exchange Limited and iFAST Corporation Limited.