Time is something that cannot be bought. Nor can it be reversed.
For many of us with full-time jobs, we trade our time and effort for money.
Some of you might have heard of the movie “In Time”, starring Justin Timberlake. In that movie, the scene was set in a world where you are able to “buy” time.
Back in real life, as investors, while we are unable to buy time with money, time can be used to make money.
Time to compound your wealth
The beauty of investing is that you can slowly inject money into stocks over the long term to build up your investment portfolio.
If we assume a consistent injection of S$1,000 per month, or S$12,000 a year, over a period of 20 years, you’d end up with S$240,000.
Better still, if the money was invested in dividend stocks that paid out an average of 4% dividend yield, you will end up with around S$500,000 at the end of two decades, more than double of what you would have obtained just from the additions alone.
The assumption here is that all the dividends are reinvested back into the portfolio to grow its value, and that the 4% yield is then paid out on the enlarged amount.
The beauty of it is that we are not even accounting for capital gains from the portfolio, which will surely be a nice bonus on top of the dividends compounding.
Dividends as a source of income
By putting your money in well-managed companies, you can slowly grow your pot of money into a substantial amount.
But if you’re looking for a way to replace your earned income, the answer is to invest in dividend-paying stocks.
Dividends act as a form of passive income that can help supplement your earned income.
And when these dividends grow in quantum, they can also eventually sustain your lifestyle and pay for your essential expenses.
In effect, you would have “bought” yourself more time as these dividends free you of the stress of having to constantly earn an income.
Get Smart: Now is the time to invest
The above is a great reason why you should start investing right now.
As you grow the size of your investment portfolio, your dividends tap will grow from a trickle into a gush.
Find time to invest so that you can buy yourself even more time.
It’s a virtuous cycle that will benefit you immensely and should not be ignored.
There are great dividend candidates out there such as DBS Group (SGX: D05) and Singapore Exchange Limited (SGX: S68), or REITs such as Parkway Life REIT (SGX: C2PU), Mapletree Logistics Trust (SGX: M44U) and Ascendas REIT (SGX: A17U).
The upside is that if you invest well, you will be able to enjoy more of the most valuable resource the world can offer – quality time with friends, family and loved ones.
Disclaimer: Royston Yang owns shares of DBS Group and Singapore Exchange Limited.