What is passive income in Singapore?
Passive income is cash flow received on a regular basis, that requires little or NO EFFORT by you to maintain it. In layman term, we can call it "make money while you sleep".This is as opposed to "Active Income" which is income that requires effort by you to receive this income. Almost everyone has an active income, such as your salary, or your business profit. In this way, most businesses are active income, not passive income, since the businessman has to work on his business to receive the income stream.
Another example, precious gold and silver in Singapore does not provide passive income, they are mere speculations.
Why you should have passive income for retirement?
We can't work forever, can we?
Elderly Care in Singapore is expensive
If you age badly, you may see a drop in active income even before retirement age. Due to aging problem, you may get retrenched, demotion, re-allocated to other sections, your active income will go down, for sure. And you definitely need more elderly care, for example, do you have any idea how much walking sticks in Singapore costs? Or you prefer something more powered, more electrical and mobile? Do you know how much a motorized wheelchair scooter in Singapore costs? Hint: Going to cost more than a drink in the pub.Living in Singapore is expensive
In the best pink of health situation, we probably retire around 60s. With long life expectancy, we still have more than 20 years of life to enjoy, and live off our savings. We will have zero active income as a retiree.And you still need tonics as an elderly! You probably still need tonics like manuka honey or Abbott's Ensure. Your simple cup of exotic coffee is not going to be just kopi-o nor cheap.
All we are saying is: it isn't cheap to age well in Singapore.
Well, how about building up your passive income while you are young and fit?
How to have a passive income?
Build them. Here are some easy and common ways.... and some not common ways. We give you 6 Passive Income in Singapore!1. Stocks Dividends
Invest in long-term, good lasting stocks. This is the #1 way to build passive income and the most stable way. The easiest way is to buy stocks that give regular and stable dividends. This dividend can be a great source of passive income.For example, as of now, 2018 last quarter, $2.92 USD per 1 Apple share (valued at USD $226 now) . That is only a 1.3% dividend yield, but justifiable as Apple stocks have risen a lot in the past few years and you stand to gain from capital growth as well.
Many SG stocks give more than 6% dividend yield, for example, UOB has 6.92%, DBS has 6.73% while Singtel is giving 6.45% dividend yields.
What if the stocks are invested have no dividends payout?
Simple. From that stock, simply sell off a small amount of the share to give you that dividend. For example, if you have 5000 of apple stocks, and the dividend of $14,600 is not sufficient, you may perhaps sell off 23 shares to get $5000 USD to spend.Do pace your sales so that you have enough stocks to feed your retirement in the long run!
2. Bonds
Bonds are basically loans to the bond-providers. Bonds interests rate is usually lower than stocks' returns and that is because they have lower risks. In the event of a default, bond owners get paid first before stock owners get paid.Corporate bonds have more risks than government bonds because corporates have a higher chance of failure and defaults.
Singapore government provides SSB, Singapore Saving Bonds, that provides an annual rate of 2.48% if you carry it till 10 years period. Furthermore, there is no penalty if you stop and sell off your bonds halfway. You will merely get the lower interest rate instead. For example, if you sold off after 1 year, you will get back your capital plus 1.80% interest rate for 1-year holdings.
The rate may be low, but bonds can be a good portion of your retirement passive income portfolio.
3. Annuities by insurance firms
Annuities are the exact opposite of life insurance. Life insurance pays out in case you die prematurely. Annuities pay you forever in case you live long after your expected lifespan.Annuities are passive income, perpetually. This means they will pay you a fixed sum annually forever, even if you live beyond the usual average life expectancy. This is a great way to hedge against living beyond your fixed savings, with stable passive income.
Usually, annuities are quite expensive to purchase and has a lousy rate of returns. I will say annuity is preferred for people who are not so financially savvy. If you can, stick to the other options!
4. Books, music, videos, content of IP value
After you have written a book, your effort stops, and yet the book sales 10 years later will continue to generate royalties paid to you. This goes the same for music, videos, the content of intellectual property value. You get paid months or years after the content is created.
You can write ebooks, write music and sell in iTunes, or create videos on youtube or blog to receive royalties or advertisement incomes (youtube, blogger, etc pays for advert displayed on your content). Look at what this Singapore blogger did for ASMR in Singapore. All for passive income in her retirement.
The bad flaw to this? It takes creative talent and lots of hard work to make this passive income to be significant. If you do love writing and creating, this will be a great hobby for you!
5. Crowdfunding, P2P, Alternative Investments
Peer-to-Peer lending or P2P and crowdfunding is the new share-economy way of raising capital for businesses. You provide capital to small startups in return for a higher rate of returns. This is like the simple version of bonds.Usually, these startups have not much business history and would not qualify for any bank loans or bonds, and therefore they have to offer a much higher return of 8% to 20% yearly from platforms like Lending Club or MoolahSense.
As you can guess, they have a higher rate of defaults as startups are not as established as companies with profitable history. This is why banks do not lend to them in the first place.
Still, do your own due diligence. Some P2P can earns up to 42.5% annually with insurance protection:- just look at what this blogger writes on Passive income in Singapore.
6. Property Income in Singapore
The holy grail of passive income in Singapore. You buy 1 (or 2 and more) properties and you rent them out for passive rental income. Not only are you getting decent dividends on your returns, but you get to participate in capital growth when your property appreciates in value.
The only problems? You need to have 2 properties to start renting since your family and you probably have to live in your first home. And properties have a high capital amount required.
There are also significant tax and duties involved, such as ABSD, Additional Buyer's Stamp Duty.
Despite Singapore's crowded and high urbanized setting, there are still properties that have low lousy tenant potential and generates bad returns, you have to do your homework and focus on properties that can rent out easily and gives a good rate of return.
More questions on property investment? Google and read up more!
Yours truly,
Cedric Maverick
This article is written by Cedric Maverick, author of many blogs such as his music instrument stands business, his coffee blog etc.
He wishes Singaporeans will plan for their retirement rather than depends on CPF. And he hopes to own his 3rd property for more passive income soon!
SeniorCare- Ensure, Jevity, Glucerna Elderly store
SeniorCare- Ensure, Jevity, Glucerna Elderly store
Gold Coin CML descriptions[/caption]
Magnet Test
One of the easiest way is to use magnet. Most metals are attracted to magnet, but silver and gold are diamagnetic (metals that are not attracted to magnets) and a magnet will not stick to it. Use a very strong magnet, such as neodymium, to test the gold. If it stick to the magnet, then it is fake gold.
Do note that this is not a 100% foolproof test to determine real gold. Some counterfeit gold are made from metals that are not magnetic in nature.
Density Test
Get an accurate scale and note the weight of your Gold bar.
Get a glass of water, place it on the scale, and set the scale to ZERO.
Tie the gold bar, dip it COMPLETELY into the water, but without touching the base of the glass. The gold bar should be in the middle of the water, note this new weight number on the scale.
Divide the first weight of the bar, by the 2nd weight number (in the water), this number should be 19.30 for an accurate measurement of Gold density. (Pure Gold Density = 19.30 g/cm3)
Ultrasound Test.
Using special instrument, you can use an ultrasonic device to test for consistency in a bullion bar. Sound waves travel at different speed through different metal. If your gold bar is merely gold plated, the numbers would differ from a pure gold bar of 99.9 purity. The sound velocity for pure gold should be 3200 meters / second (or 0.130 Inch/µSecond)
Porcelain Test
Rub the piece of gold across a piece of unglazed porcelain tile. It should not make a black streak. If it does then it is pyrite. If the streak is golden yellow then it is gold.
Acid Test
Warning: This test is destructive and will spoil a tiny portion of your gold. Please do not use unless absolutely necessary.
Buy a nitric acid test kit. Scratch a surface of the gold piece and add a few drops of the acid on the gold. If it turns green, the item is either brass metal or gold plated. If it turns milky, it is gold plated sterling silver. If there is no reaction, then it is real gold.
Some key pointers before you buy that gold!
