Asked by Anonymous
Asked 2w ago
I am relatively young, but I am hoping to get regular returns in the future so I have the option not to work at a job, should I choose to.
Top Contributor (Oct)
If you have $385K as cash savings, be sure to segregate your emergency expense fund first; this is usually at least 6 months of your expenses, and 12 to be safe. I'm going to presume that you have also settled your insurance coverage.
Any amount over and above that emergency fund can be used to invest; I'm going to use a ballpark figure of $350K for illustration purposes. You'll have to earmark an amount as a warchest for market opportunities, but there should be no issues to start to deploy anywhere from 25%-50% of your cash.
If you wish to get passive income to give you the option to stop working, then you will want to invest in income producing assets. These take the form of both guaranteed income and variable income. As you still have the capacity to work, add on to your investments over time so that you can grow your investments to something more. At 4%, $350K generates $14K/yr, which, depending on your lifestyle, needs, etc, may not be quite sufficient enough.
The exact composition of your portfolio will depend on your preferences, so take some time to understand the various asset classes available to you, before you create a portfolio. An independent financial advisor can assist you on this.
Once your passive income flow from your investment portfolio exceeds your basic expenses, you'll achieve your goal. Hopefully my answer will give you an idea of what to look out for, I can only give a general guideline based on the information you have provided, but if you need a little more analysis, feel free to reply to this post.
Firstly, congratulations on having such a hefty amount as savings at a young age. Now you have two options in front of you:
I work at Kristal.AI, and it's my passion to evaluate various upcoming investment opportunities.
I hope you find this helpful! Happy investing!
Top Contributor (Oct)
.... Wow. Depends what relatively young means but amazing you got to such a large lump sum so quick. And in cash none the less - amazing some FA hasn't gotten to you quicker.
If you have no issue continuing to work for medium term and can continue to generate cash surplus, I would put the majority of this lump sum in growth assets.
Majority since if you are generating cash you won't need to touch it.
Growth assets so that with a good return can come back later to the accumulated sum (and combined with income/surpluses along the way) reevaluate on your aim of not working
My 2 cents:
Your question is vague. Clarity, for example, getting $2000 monthly cash flow by 2025, would be my 1st step.
Unclear destinations will not give investors clarity on the investment tool to use.
I won’t invest until I’m clear of my intentions. I would set aside 15 minutes to ask (a couple that came to my mind while answering):
For myself, I currently set aside $600 each month and it’s labeled as “Parent’s retirement fund”. This fund objective is to provide a future cash flow of $2k a month when it reaches 2026.
When the objective is clear, investors will not put their capital at risk because:
Rule 1: Never lose money Rule 2: Remember rule 1
Majority all of the answers here focus on growing your money, however, I would like to take a different stance here and bring out the perspective of expenditure. I think that is a crucial factor that you might want to analyse. Not working sounds amazing but on a day-to-day basis, what form of lifestyle do you lead? How much returns do you require in a day / month? And from there, you can deduce how hard your $385K has to work in order to generate your required income.
10% returns is plausible, but it might not even be enough for some should they consume starbucks and dine at restaurants everyday! But on the other hand, 5% returns might be a lot for some if they eat mixed rice and take public transport everyday. If you are a bigger risk taker, you can try US markets for higher growth (but vice versa, higher falls) in terms of capital. But if you are just looking for recurring income, you may consider REITs which can provide you 5-6% thereabouts. Knowing your spending habits will allow you to design your portfolio best to give you the adequate returns your require to lead your lifestyle. Hope my answer gives you more insight!
Stocks, ETF. without a doubt.
I agree with Kelly that you have a decent lump sum of cash and perhaps you could speak to a Financial Advisor to advice you on financial planning. However, if you haven't started any aspect of financial planning, you could perhaps start off with insurance as it is always good to cover your bases before you start to invest. This is crucial if you have dependents or current liabilities that you have to account for.
For a smaller amount/portion of your savings, you could also explore investing in robo-advisors that incur low (or none at all) management fees for a good exposure to global diversification of your portfolio. Aside from that, you could also look at growth stocks (low High Book-to-Market ratio) and perhaps REITs or REIT ETFs if you wish to look for dividend income from your investments.