How can I build a simple $500 monthly passive income?

$500/month = $6,000 annually.

Assuming you go full on on Singapore Straits Times Index ETF (ES3) that has a dividend yield of 3.5%, you are probably looking at around $170,000 worth of ES3.

However, it is generally accepted that the Singapore Straits Times Index ETF (ES3) lacks growth, as most of the index comprises of REITS or large value companies. Hence the aforementioned position will offer limited growth.

As such, you might want to consider between Growth investing and Dividend investing as both are different forms of wealth accumulation. If you already have that nice sum of money and is young, I rather you go for Growth Investing.

If you are interested you can check out an article I wrote previously here about their differences: Growth Investing or Dividend Investing?

Cheers! :)

- Jeffrey (jeffreyleezq.com)

Hi Sean,

I assume you're referring to $500/month of passive income via investing (dividends). This translates into $6000/year, and assuming an average dividend yield of 4% across your portfolio, the capital you would need to achieve this is $150k.

As for how I would construct such a dividend portfolio, a rough allocation would probably be something like this:

30% SG blue chips

30% SG REITs

30% HK blue chips

10% elsewhere undecided (ex. US)

The reason I would choose to have 60% of this portfolio in SG is that many SG blue chips/REITs have very attractive dividend yields, helping to pull the average dividend yield of the portfolio up. This will also mitigate FX risk since most dividends will be paid in SGD. Another 30% would be in HK because there is no withholding tax between HK and SG, so this will serve as some diversification to the dividend portfolio without compromising on tax efficiencies. The last 10% could be allocated to other good opportunities that come by, as long as it's not US-listed to avoid the 30% withholding tax.

Another reason that this portfolio would be heavily skewed towards SG/HK is that I'll probably have another investment portfolio that aims to achieve growth rather than dividends ($500/month probably isn't enough to be retiring on). Chances are that this portfolio will heavily underweight both the SG/HK markets in favour of US/EU/UK/China markets. So this will help to add more diversity to my overall investment portfolio.

Also note that the portfolio is largely equity because, as before, $500/month won't be enough to retire on, so I'll probably still be able to tolerate high levels of risk. Otherwise, a portion of it could be swapped out for fixed income investments like bonds, though that will translate into a lower dividend yield of the overall portfolio.

Regards,

thefrugalstudent