Knowing how to invest the money in your financial freedom jar is very important. I divide my financial freedom money into 3 buckets;
1st bucket - 6 months living expenses,
What do I mean by monthly living expenses? It is the minimum amount that you need to get by in a month for food, accommodation, utilities, family needs etc, etc. If your monthly living expenses is $3,000, then I suggest that you put $18,000 into a savings account that gives you the highest interest rate. I put my money into an Australian term deposit that gives me 5% interest per annum. Why Australia? This is because I believe that Australia is a rich country with an abundance of natural resources and their currency is pretty stable.
This is how I put my money in term deposit. Let's say my 6 months living expenses is $60,000. I will split that into 6 portions and deposit $10,000 into 6 consecutive months and the term period will be for 6 months. With this method, I will have $10,000 liquidity on standby every month. If I don't need the money for that month, I will renew my term deposit for another 6 months. This is to make sure that I will not be penalise for withdrawing before the maturity date.
2nd bucket - Buy & Hold,
For this bucket, I am looking at positive cashflow from my properties and dividend yield from my stocks. When I buy property, I always look at the rental yield first, unlike most people who focus on capital gains.
Most people will buy a property and hope for capital gains over the long term. There are many things to look at when you invest in properties. I suggest that you educate yourself in this area before investing in any property. Our company conducts a seminar call the Property Investment Program, you may wish to call my company at +65-62210090 to register yourself for a free preview to know more about property investment.
As for stocks, I like to buy monopoly stocks that has got few or no competitor, good management team and consistent dividend payouts. Some of the stocks that I bought in Singapore are SMRT, Comfort Delgro, SPH and Suntec Reit, just to name a few. Besides the dividends, I also lend out my stocks thru' CDP for an additional 4% rental yield per annum. My average return is about 18% per annum. Knowing when to buy is also important in stock investment. I usually wait for a crisis before I move in for good stocks that are selling below their intrinsic value.
80% of the money from my FFJ are park in my 2nd bucket
3rd bucket - Momentum
Make sure you fill up the 1st and 2nd buckets before you consider the 3rd bucket. This is where you look for high returns but it does come with high risks. I invest not more than 20% of my FFJ in this bucket. Some of my investments in this bucket include land banking, bird nests farming and some small businesses with friends. I am prepared to lose everything in this bucket and if that happens, it is not going to affect my lifestyle in anyway. However if the investment bare fruits, it is a bonus to me.
Let me share with you that some property investment comes under the momentum bucket, this is because many "uneducated" property investors lose their pants investing in properties. Worst of all, they don't even have the first 2 buckets as insurance. Getting educated makes a big difference.
To me, any investment that promise high and fast returns comes under momentum.
Next week I will talk about the 2 Wealth Creators that you will need to create wealth for yourself.
