SINGAPORE: A 31-year-old Singaporean shared his inspiring journey from poverty to financial stability, emphasising the importance of long-term financial planning as he stated: “Building wealth is a marathon, not a sprint.”
The Redditor, who started investing at the age of 18, offered valuable insights into his approach to wealth-building, rooted in disciplined financial management and prudent investment strategies.
Growing up in extreme poverty with a family of seven living in a one-room government rental flat, the Redditor’s financial situation gradually improved. Today, he owns his own home and enjoys financial stability.
The Redditor’s advice, distilled from his personal journey, is characterised by the belief that building wealth is a gradual process. He shared his financial strategy as follows:
First is sticking to a budget.
Allocating 55% of his income towards daily expenses and necessities like food, transport, and mortgage. A substantial 35% of his income is set aside for long-term investments, while he reserves the remaining 10% for leisure activities like travel and social engagements.
Second, he stressed to “only invest in things you understand!”
He cautioned against the allure of complex investment vehicles like cryptocurrencies, options, or futures for those with limited knowledge.
Instead, he advocated the practice of Dollar-Cost Averaging (DCA) by investing his money monthly into a relatively secure index fund, the S&P 500 (SPY), since 2010. This strategy has yielded an average annual return of approximately 10-12%.
Investing in the S&P 500
Besides Index Funds, the S&P 500 ETFs or Exchange Traded Funds such as the S&P 500 (SPDR) or S&P 500 (VOO), among others, are also something you may want to consider.
And if you’re concerned about how your investment in the stock market through these ETFs would affect climate change, animal welfare, social and corporate governance, better known as ESG Investing, you may want to consider the Vegan Climate ETF (VEGN) instead. This ETF is also a low-cost index fund, just like the S&P 500, but minus the companies that exploit animals, people and the environment.
The Power of DCA (Dollar-Cost Averaging)
Coming back to the Redditor’s example, he stated that even with a median income salary, which he assumed to be S$5,000, you can do it. By consistently investing S$1,750 every month and allowing the power of compounding to work its magic for 30-35 years, he projected a potential liquid asset portfolio ranging from $5 million to $9 million.
He advised his audience to remain patient and allow compound interest to steadily grow their investments, saying, “Just leave the money in there and let compound interest work its magic and enjoy the fruits of your labour!”
Drawing from his personal experience, he began his financial journey at 18 with small investments and progressively increased his portfolio.
Currently, he sits on a portfolio valued at $200,000 after 13 years of financial discipline. He is on track to retire before 65 and projects his portfolio to reach between S$4 million and S$5 million by age 55.
According to a study by the wealth management group St. James’s Place Asia, over half of Singaporeans (55 per cent) expressed that they do not perceive themselves as financially affluent.
In general, merely 38 per cent of respondents in the survey indicated contentment with their wealth, while 42 per cent expressed a desire for greater affluence, and only 19 per cent believed that they possess excessive wealth, as reported by Yahoo Finance.
Regardless of your position within the study’s demographic, take heed as the Redditor wisely advised: “Remember, it’s a marathon, not a sprint!“