Singapore is going through a rough patch right now.
The pandemic has caused the country’s second-quarter GDP to plunge by a record 13.2%.
Sadly, along with the decline, retrenchments have spiked up in the quarter ended 30 June, more than doubling to 8,130 compared to the previous quarter.
And there could be more challenges to come as relief measures are slowly winding up, exposing businesses to the full brunt of the crisis.
With all that’s been going on, retirement may sound like a pipe dream to many.
However, the truth is that retirement is not out of reach if you are disciplined and patient with your investment portfolio.
Having a healthy savings habit is a good start, and so is maintaining a buffer of cash in preparation for bad times such as these.
Here are four things you need to know to enjoy the comfortable retirement you deserve.
Resilience is the word
The word “resilience” is used much more often these days as the world is suffering from an unprecedented health crisis caused by the coronavirus.
For businesses, being resilient means being able to withstand sudden economic shocks and plummeting demand without going bankrupt.
And the first place you turn to for resilient companies is blue-chip companies.
These companies have a long track record of weathering crises, are well-capitalised and also have dominant competitive positions.
By including such companies within your portfolio, you can sleep better at night knowing that they have a higher chance of weathering the storm.
With much better resources available, these businesses may also be on the lookout for acquisitions on the cheap to further solidify their competitive position.
When the crisis is over, these companies will emerge even stronger and can go on growing.
Of course, the key is also to buy the right blue-chip companies (i.e those that are performing well), and not those that are falling on hard times.
Turning on the cash tap
Having a source of passive income is important in your retirement years, as you would already have ceased active employment by then.
And what better way to enjoy this type of income than to own a bunch of dividend-paying stocks?
Choosing companies that pay consistent dividends is one of the keys to a successful retirement.
As such businesses generate copious amounts of cash, this also makes them less susceptible to getting in trouble when a downturn hits.
It will be a bonus if the company can increase its dividend payments over the years, as this will boost your passive income flow without the need to inject more cash.
What’s more, as companies pay out more dividends, it also signals that their business is booming, which in turn will result in a rise in the share price.
The power of compounding
Receiving dividends always feels satisfying.
But that’s only part of the equation.
The other is for you to take that dividend and reinvest it in even more dividend-paying companies to receive ever-higher dividend payments.
You could recycle the money back into the same company that paid you the dividend or use the cash to buy another dependable dividend payer.
Such a process is called “compounding”, and it can work wonders for your investment portfolio and dividend flow.
If this process is repeated over years, even decades, it will result in a substantial increase in the dividends paid out annually.
By the time you are ready to retire, the compounding would have left you with a veritable pile of quality companies that churn out ever-increasing dividends.
Long-term growth catalysts
Finally, you should look for businesses with a long runway for growth and have clear catalysts supporting it.
Choose industries that will continue to boom for many years to come, as well as nascent industries that have the potential to become much larger in time.
These catalysts will ensure that your investments can enjoy multi-year growth, and will also make them more resistant to poor economic conditions.
As companies find their niche and develop their competitive moat, your investment will become more secure as well.
Get Smart: Patience and fortitude
It won’t be an easy journey, though.
The road to riches will not be a smooth ride as you may encounter obstacles along the way.
Patience and fortitude will go a long way in helping you to achieve your retirement objectives.
Allow yourself room to stumble, but learn from your mistakes.
If you fall, pick yourself up again and soldier on.
With perseverance, you will eventually reach your goal and be able to enjoy your well-deserved retirement.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.