You know who I am talking about.
Everyone has that one friend that excelled in his or her career..
The star employee who has been able to make good for most of their lives within the same company, steadily climbing the corporate ladder.
I have a friend who proudly proclaimed that he has worked half his life in a multinational oil and gas company, while a cousin of mine has chalked up more than a decade’s worth of experience in a US bank.
The skills that these friends built up over the years allowed them to excel in their jobs, earning them promotions and accolades.
That’s a rarity.
Flitting around like a butterfly
The past two decades have been blighted by multiple downturns which has led to many broken employment records.
In 1997, we had the Asian Financial Crisis.
This tumultuous event was followed by the dotcom bust at the turn of the century.
Then, eight years later, in 2008, the Great Financial Crisis led to massive retrenchments, as businesses grappled with a deep recession.
Finally, two years ago, Singapore sank into its deepest recession ever as growth was crimped by the outbreak of the pandemic.
Given the climate, it is not unusual for employees to fall victim to economic conditions as companies pull back and cut costs.
As such, under this context, seeing friends who do well in their careers has, no doubt, led to significant admiration as I marvel at their achievements.
Yet, as the years pass by, it occurred to me that almost all jobs have a finite lifespan.
While the Singapore government has raised the retirement age to 63 years and the re-employment age to 67, most employers will still expect many of their employees to slow down and leave the workforce before then.
And once you settle down into retirement mode, your main source of income will be conspicuously absent.
This got me thinking – are the skills that these friends built up still relevant once they leave the workforce?
If not, then how can they generate the income that they need to get them through their golden years?
The most important skill you can have
It was then that I realised that I had, without realising, been cultivating an important skill that would last me the rest of my life.
Yes, I am talking about investing.
Even during my corporate life, I was busy reading up investment books and utilising my accounting skills to dissect financial statements.
I was honing my skills as an investor, and in the process, I made fewer mistakes and could grow my wealth successfully.
Investing is, for me, the most important life skill you can have.
When your active income dries up and it’s time to throw in the towel, investing can help to substitute for the loss of income and sudden drop off in brain activity.
Not only does investing engage your mind, but it also provides you with a treasure trove of dividends and a robust retirement portfolio that you can either tap on or leave behind for the next generation.
Increasing your flow of passive income
To be clear, I am not advocating that you ignore the skills you picked up in your job.
Those are important, too.
It’s easier than ever to market your skills or take on freelancing jobs.
Even then, I would argue that you start investing as early as possible even as you build your career.
These two pursuits can be done side by side and will complement one another.
As your investment acumen increases, your flow of passive income should also increase in tandem as you pump more money into dividend-paying stocks.
And as you climb up the corporate world, you should also have more money to slowly sock away into great businesses.
The graphic below explains how this process works.
Source: Author’s Compilation
At age 30, when you are just starting, your active income is probably much higher than your passive income as you are just building up your investment portfolio.
Over time, you can accumulate solid dividend-paying stocks such as DBS Group (SGX: D05) or Singapore Exchange Limited (SGX: S68) to boost your dividend flow.
You can also add in well-managed REITs with strong sponsors such as CapitaLand Integrated Commercial Trust (SGX: C38U), Mapletree Logistics Trust (SGX: M44U), or Frasers Logistics & Commercial Trust (SGX: BUOU).
Once you have sizable stakes in these stocks, your passive income flow will increase to allow you to slow down your corporate life.
At this point, your active and passive income are close to equivalent, allowing you to sit back and take a more relaxed stance.
By age 70, your active income flow will cease, only to be fully replaced by passive income as you boost your ownership in a variety of great companies.
Show me the money
The good news is that it’s not as tough as it looks.
You can certainly pick up the most important skill in the world.
All it takes is that first step to put some money in well-run dividend-paying companies.
At The Smart Dividend Portfolio, we have built up a portfolio of 25 solid dividend-paying stocks that can last you for life.
Come join us as we show you how to fish for great businesses that can supply you with dividends for the rest of your life.
In a recession…should you buy blue chip companies? Or will REITs be a better investment vehicle? These are questions every investor might ask today. And these are what we’ll be answering in our upcoming webinar “How to make money during a recession”. Come prepared as you migh walk away with insights that could make you even more money than during a bull market. Reserve a FREE seat here!
Disclaimer: Royston Yang owns shares of DBS Group, Singapore Exchange Limited and Frasers Logistics & Commercial Trust.