Considered that the dividends earned is little when you started investing young with small capital. Is it still worth to start early? - Seedly
 

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Asked by Anonymous

Asked on 01 Dec 2019

Considered that the dividends earned is little when you started investing young with small capital. Is it still worth to start early?

Just started investing and got myself some stocks in small quantities. For the dividend payout is only $14-$25 only. Is it still worth for me to start early with small capital? I would like to build a war chest too, but for me. Money not seen is money not spend so it’s rather hard for me to build one.

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Daryl Liao, Fti
Daryl Liao, Fti
Level 7. Grand Master
Answered on 15 Dec 2019

Hey there.

Definitely! You have to start somewhere.

although it seems small now. But you gain experience as you go and it's always better to make mistakes when your portfolio is small than big right? :)

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Jonathan Ang
Jonathan Ang
Level 7. Grand Master
Answered on 08 Dec 2019

You dont have to go for dividend companies.

Go for growth companies that can grow your money first.

Case in point: investing in visa and mastercard from the 08 crisis can send you laughing your way to the bank :)

You can google their stock prices :)

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7
Sudhan
Sudhan
Level 5. Genius
Answered on 02 Dec 2019

HI anon, I would definitely say it's worth investing as early as possible for the long-term to let compounding do its wonders. Granted, when you start off, the dividend you receive might just be a trickle. But as you gain experience and knowledge, and earn more, and invest in more dividend stocks, your dividend would grow over time.

The benefit of compounding our money early over the long-term is shown in one of the Dow Theory Letters, entitled Rich Man, Poor Man.

Say there are two people, Ah Tan and Ah Lee.

Ah Tan starts investing at the age of 19. He invests $2,000 every year from age 19 until 25 and stops thereafter. That means he has put $14,000 into the stock market.

On the other hand, Ah Lee starts investing only at the age of 26. From age 26 until 65, he invests $2,000 annually in stocks. By the time he turns 65, he has contributed $80,000 to his portfolio.

Assuming both investors can generate 10% yearly on their portfolios, whose portfolio would be larger at age 65?

Most would think that Ah Lee would have a bigger portfolio. Yes, Ah Lee indeed has a larger portfolio at $973,704 while Ah Tan’s portfolio would be worth $944,641.

However, here’s the fun part.

Ah Tan wins overall as he has higher profit of $930,641 versus Ah Lee’s $893,704. Remember that Ah Tan had only put in $14,000 over seven years, while Ah Lee contributed $80,000 over 40 years. For more on the benefits of investing early, you can check out Seedly's article at https://blog.seedly.sg/start-investing-early.

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7

Hi anon,

I can tell you that I started on my unit trusts with $1000 a long time ago. My dividends were $4/mth. But I still persisted and added to my position slowly over time.

Today my UT dividends are 3 figures monthly, and I'm just ploughing them back into the fund to continue compounding since I do not need the cash flow yet.

Now, imagine if I started doing this 5 years earlier? I might be approaching a 4 figure monthly dividend income by now.

Sudhan's story of Ah Tan and Ah Lee is very applicable to even a 3% growth rate. Investing $200/mth for 15 years from 20 to 35 at 3% and then stopping, will generate the same portfolio size at age 65, compared to investing from 35 to 65 at the same $200/mth and 3%. The difference is that the person who started at 35 had to put in twice as much. And we're talking about a 3% growth rate here, which is a very achievable figure. So start early. Even I regret not starting earlier, so take it from me.

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Elijah Lee
Elijah Lee

13 Dec 2019

Echo: Schroder's payout is not fixed and depends on the underlying yield of the portfolio. We get updates from the fund house directly but I am unable to share it due to the nature of the information. However, I can assure you that the current payout is sustainable.
Echo Chen
Echo Chen

13 Dec 2019

Thank You Elijah!
Bibiana
Bibiana
Level 7. Grand Master
Updated on 03 Dec 2019

I hope this graph answers everything for you.

When you're starting with a small capital, it's ideal to lower your brokerage cost as much as possible, otherwise your returns will get eaten up.

FSMOne and Standchart starts from $10 (compared to other brokerage houses, which is around $25). ​​​

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Kian Chee

04 Dec 2019

This is so helpful 👍
Heah Min An
Heah Min An
Level 5. Genius
Answered on 02 Dec 2019

If not now, then when?

I’m 35 this year and I implore you to take a step back & consider the following:

A. What is your big WHY?

My current portfolio is building a retirement income portfolio for my parents. You’ll have your own WHY, so figure it out so that you stay rooted to your cause.

B. Generate wealth over time by..

starting off with the right attitude: Save before I spend.

I set aside $1000 each month for building my war chest.

It’s not the absolute amount.

It’s the attitude towards money for even bigger amounts of $ serve no use in the absence of right attitudes.

Each round of dividends that I receive has 2 portions:

A. Invest back to grow my war chest

B. Happy food as leisure

I only started B 2 years ago. I started investing 10 years ago. Make time our friend.

& oh, invest time into learning your preferred investment tool. Mine’s value investing.

I don’t have a full context of your background thus please tweak my suggestions accordingly.

Thank you for reading my post.

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Bjorn Ng
Bjorn Ng
Top Contributor

Top Contributor (Jan)

Level 9. God of Wisdom
Answered on 04 Dec 2019

Hey buddy, definitely worth it.

It's exactly like planting a seed. After planting, you have to water it (i.e, load up on the stock at the appropriate valuation). It takes time, but once it becomes a flower (i.e your stock is at a sizeable amount), that is where you reap your fruits of labour. Definitely and 100% worth it.

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Junus Eu
Junus Eu
Top Contributor

Top Contributor (Jan)

Level 9. God of Wisdom
Answered on 02 Dec 2019

DEFINITELY, because of compound interest.

Not only that, you start investing in your financial knowledge from a young age.

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J
JY
Level 4. Prodigy
Answered on 22 Jan 2020

Ask yourself, if not now, then when? Do start early so that you can gain on the compounding effects & also knowledge to better guide you in your investment decisions.

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Frankie Aufhauser
Frankie Aufhauser
Level 7. Grand Master
Answered on 21 Jan 2020

It's always the best ida to start early

think of the compounding effect

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Sharon
Sharon
Level 4. Prodigy
Answered on 21 Jan 2020

Eh hallo, I wish I have your time! Start early! Better to see some money coming in than none, right?

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I always believe in the concept of Long term horizon timeline aka 长期饭票. Dividend stocks prices can go on a roller coaster ride during this long few years, but if the consistent dividend payouts is at least 4-5% of initial investment sum in a year, I think it is still good.

Flatten our the rough waters and chart ahead.

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Lim Chun Long Jimmy
Lim Chun Long Jimmy, Co-founder at PolicyWoke Pte Ltd
Level 6. Master
Answered on 19 Jan 2020

It's never too early to start investing in stocks. The earlier you start, the sooner you will reap the rewards of the compounding effect in the long run.

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pat
pat
Level 7. Grand Master
Answered on 18 Jan 2020

Focus on capital growth/accumulation at your beginning stages is better. Dividends should be done after you hvr a sizeable capital to put in one counter

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Rave Ong Ci De
Rave Ong Ci De
Level 6. Master
Answered on 14 Dec 2019

It is still worth it to start, no matter how small.

Your returns are small because your initial capital injection is small. So in a way, your returns are small because your risks are small! Besides, it is good to start small and see how you would psychologically react to the market, such as what happens when a dividend get cut, or there are additional special dividends declared, or when share price goes up/down. Hopefully, your dividend amount will grow and it can trigger your endorphins which in turn, spur you to be a better investor.

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William Seah
William Seah, Financial services consultant at Pias
Level 3. Wonderkid
Answered on 13 Dec 2019

My very first dividend came in at a lovely $20. After three months. It was quite sad. But it's still more than $0. Plus there was the idea that I had money working for me.

10 years later I get about $500 a month. Took a while but it's there.

it's not about how much to start with. It about starting.

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Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 8. Wizard
Answered on 10 Dec 2019

For dividend investing, you are in it for the long haul. Build your capital, deploy it into dividend generating stocks and reits and reinvest the distributions. Best if you can find a good entry price into stocks and reits that have a record of increasing their dividend payouts. Everyone starts somewhere, you need to take that first step into it.

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Alfred Chan
Alfred Chan
Level 4. Prodigy
Answered on 08 Dec 2019

Investing early is definitely one of the things to do, but only if you can afford. Since you've mentioned money not seen is money not spent. You can probably automate this process?

Perhaps setting up a regular RSP using DBS Invest saver or purchasing of UTs monthly. And slowly build up the pot. After awhile, the pot will grow and perhaps you will learn and appreciate the value of investing early.

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SW
Shaun Wq Lim
Level 6. Master
Answered on 07 Dec 2019

I like to tell my friends the following:

  1. Start early, start small, take action

  2. You have to be in the (stock) market to experience the (stock) market i.e. emotional, knowledge, judgement, action

My journey:

7 years ago, I started with RSPs to force myself to remain invested and to build up my base portfolio. As my funds were limited, I started small amounts, even though the costs are quite high. A conscious decision, as I would have most likely spent the money on rubbish stuff anyway. I started with two counters. $100/stock/month. First year dividend was $14. This year is $1300. Not a lot in dividend growth but I learnt a lot of other stuff along the way.

For war chest, you can do automated monthly transfer to another savings account. For some banks, you can set savings goals for the bank to auto-transfer money into and you have log in to transfer money out manually. Which makes you think really hard if the money is being used wisely (at least for me).

Got to have discipline and take concrete actions!

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Adelyn K
Adelyn K
Level 5. Genius
Answered on 04 Dec 2019

Probably better to go into ETFs over buying stocks, $100-$200/month will net you some good dividends over a period of 2-3 years of investing. Small gains since the ROI is only 2+%, but better than nothing.

You can also consider investing into your CPF-SA/MA to get 4% interest that compounds yearly too. But you don't get visible dividends into your bank account and only see it when you retire.

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