Turning $410K into $4.5 Million: A Singaporean's 12-Year Investing Plan
This article outlines a 38-year-old Singaporean tech worker's plan to grow a $410,000 SGD portfolio to $4.5 million SGD within 12 years through growth investing in US stocks. He emphasizes a contrarian approach and shares his financial goals, investment strategy, and the mindset required to achieve them. The channel has been renamed to the Contra Turtle Show.
Financial Goals and Timeline
The investor aims to generate $15,000 SGD per month in passive income at age 50. This figure is considered adequate to cover his family's basic expenses (housing already paid off), transportation, food, and allow for travel two to three times a year, especially to Japan. This passive income will allow for a truly stress-free lifestyle where budgeting is less of a concern. The target of $4.5 million SGD was derived by multiplying the desired annual income ($180,000 SGD) by 25, based on the 4% consumption rule for withdrawing from a stock portfolio.
Investment Brokerages and Portfolio Strategy
The portfolio is spread across three brokerages: Tiger, Mumu, and IBKR. It's a concentrated portfolio focused primarily on the technology and e-commerce sectors, areas where the investor has expertise from his engineering background. Details of specific stock selections can be found in his past videos.
Two Potential Paths to Passive Income at 50
The investor is considering two methods for generating passive income upon reaching his target:
- Divesting and Investing in Local Dividend Stocks: This involves selling the growth portfolio at 50 and reinvesting the $4.5 million SGD into Singaporean dividend-paying stocks (e.g., DBS, OCBC) yielding 4-5% annually. This offers lower volatility, avoids US estate taxes, and dividend taxes, but sacrifices potential for long-term growth.
- Maintaining the Growth Portfolio and Withdrawing 4% Annually: This contrarian approach involves allowing the portfolio to continue compounding, while withdrawing 4% annually by selling shares. This is more volatile, requires careful budgeting and planning to manage withdrawals effectively, but offers significantly higher growth potential. The investor is still evaluating which path to take and will assess his mental sharpness and interest in the tech sector at age 50.
Achieving the $4.5 Million Target: Calculations and Mindset
To reach the goal, the investor needs to achieve a compound annual growth rate (CAGR) of 16.5% over 12 years, contributing $60,000 SGD annually.
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Contribution Rate: $60,000 SGD per year from salary and bonuses.
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Time Horizon: 12 years.
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Target Amount: $4.5 million SGD.
He emphasizes that this level of investment is a result of career progression and conscious financial decisions, not overnight success. He avoided lifestyle inflation, prioritized investing over status symbols (cars, luxury goods, condos), and deferred gratification. He also shares that he treats his home as an expense and focuses on income-generating investments for financial freedom.
He warns against playing the "condo chasing game," as high mortgage payments leave less capital available for investment. He highlights that the value of a condo is only realized when sold, which can be problematic if it's also the primary residence.
The Importance of Not Giving Up
The speaker emphasizes that he was a late bloomer and wasted much of his twenties. He encourages viewers, especially younger ones, not to make the same mistakes and to focus on long-term financial planning. It's important not to fall into the mental trap of giving up due to perceived high-income requirements. Parameters such as the time horizon and target amount can be adjusted to suit individual circumstances.
Achieving the Required 16.5% CAGR
The speaker acknowledges that achieving a 16.5% CAGR requires a more aggressive investment strategy than simply investing in broad market ETFs. He shares his thoughts on comparing S\&P500 and NASDAQ return percentage.
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S&P 500: Historically returns around 8% median rate of return per year on a 15-year rolling basis.
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QQQ (NASDAQ): Historically yields about 12% on a median rate per year over a 15-year rolling period.
Given his shorter time horizon, he decided to move beyond ETFs and pursue individual stock picking within his circle of competence (technology) to potentially outperform the market.
Current Portfolio Performance and Long-Term Expectations
The Contra Turtle fund has achieved a 15.7% return over the past four to five years, despite recent market volatility. He recognizes the difficulty of sustaining high returns over long periods and uses Warren Buffett's 21% return over 53 years as a benchmark. He believes he can achieve slightly better returns than the QQQ by focusing on contrarian tech stocks and holding them long-term.
The speaker closes by highlighting the power of compounding, emphasizing that a 16% return compounded over 12 years can lead to an impressive 6x return on capital.