Millions of Singaporeans aspire to earn $5,000 a month in passive income through investments. Learn how to develop your passive income portfolio today so that you can sit back and relax in the future.

It’s called passive income since it’s earned by doing almost nothing — hence the name.

As a result, passive income doesn’t magically appear out of nowhere. It would help if you first got the ball rolling to reap your labor rewards in the future.

Who wants (or needs) a passive income portfolio, and why?

It is no longer necessary to work to earn revenue. You continue to work because you want to, not because you have to make ends meet. In addition, early retirement is possible.

Even a few hundred dollars in passive income, on the other hand, are insufficient. Your monthly expenses must be covered entirely by your passive income.

The following are some tips on how to increase your passive income portfolio in Singapore:

Six ways to build your passive income portfolio

#1 Earn rental income through property ownership

You can rent out your home to make passive income (or rooms in your home).

In addition to the current demand in the property market, other factors that influence rental revenue include the type of property, condition, and location.

Tend to the fact that rental money doesn’t generate profits right now. Home loan payments, stamp duty, and renovations or repairs must all be taken into account. Eventually, after the rental income has covered all costs, your earnings will increase over the long haul.

#2 Dividend income from stocks 

It’s not something you can do the next day. But you can invest in dividend-paying stocks.

Each year, companies distribute dividends to their owners. All firms don’t pay tips, and they aren’t required to pay them.

What, then, is a high dividend yield? —— In general, returns of at least 4% are considered to be a decent indicator. Real Estate Investment Trusts (REITs) and blue-chip stocks are the two primary categories of stocks to consider when building a passive income portfolio.

The fact that REITs must distribute at least 90% of their taxable revenue each year is one of the reasons they have high dividend yields of 4% to 8%. Investment in a REIT is like investing in a landlord who collects rent and distributes it to shareholders.

Blue-chip stocks relate to major, well-established corporations that retail investors are familiar with and would be able to identify. Think of DBS, OCBC, CapitaLand, Sheng Siong, Dairy Farm, Singtel, and others in this category of companies. Blue-chip stocks in the United States include Apple, Coca-Cola, Procter & Gamble, McDonald’s, Berkshire Hathaway, and others. This group of blue-chip stocks has historically paid out large amounts of income to their shareholders.

Typically, dividends are given out annually, semi-annually, or four times per year. Some firms offer rewards in the form of shares. The dividend distribution date varies from stock to stock, and you may find it by consulting the company’s website.

#3 Profits from Exchange Traded Funds (ETFs)

A dividend ETF is an excellent alternative to selecting a single asset or a small group of stocks for your dividend portfolio. As the name implies, ETFs are baskets of assets provided at a reasonable price that attempt to mimic the performance of an index. Stock exchange-listed ETFs can pay dividends to their unitholders, much like stocks.

For example, Beide ETFs monitor the Straits Times Index (STI) – an index of the top 30 Singaporean equities. You can earn dividend income by investing in an ETF that exposes Singapore’s 30 largest corporations each year. This ETF paid out $0.1268 per security in 2020. You’d receive $1,268 in dividends if you held 10,000 units of Nikko AM STI ETF during the year.

Dividend-paying stocks and ETFs can grow your wealth faster if you add them to your portfolio as soon as possible. Particularly in your youth, rewards are more valuable when you don’t rely on dividends for income but instead reinvest them.

#4 By acquiring bonds, you can receive regular coupon payments on your investments.

One of the most reliable investment options is bonds or fixed-income instruments.

An investment bond is simply a loan to a corporation in return for a set coupon payment. Coupon payouts and payment dates are more predictable and visible with bonds.

Take, for example, the Astrea VI bonds, which were hugely oversubscribed. A semi-annual payment of 3% of your principal amount is due on 18 March and 18 September each year if you were allocated Astrea VI bonds. You might use 5 or 10 years to redeem your principal amount.

Singapore Savings Bonds (SSBs) are a popular low-risk bond that you can purchase to begin started.

A bond’s liquidity is lower than that of equity. Bonds can be purchased and sold on the open market, but there may not be enough purchasers eager to acquire them. You must also be willing to hold the bond until it matures. Bondholders must be willing to retain the Astrea VI bond for at least five years.

#5 Use a fund or robot advisor to generate income

Aside from ETFs, you can also purchase mutual funds or unit trusts. You can make purchases of this type via investment platforms, Robo-advisors, and insurance providers.

The income-generating portfolios are offered by a select few Robo-advisors as well.

For example, Investing in bonds, REITs, and dividend equities in StashAway’s Income Portfolio is designed to create income. Only this portfolio has a $10,000 minimum investment requirement. If this portfolio generates dividends, you can choose to reinvest them or have them paid to your bank or SRS account. has introduced a new retirement income fund, Fullerton money owl wise income, designed to support you provide for retirement by generating a continuous stream of passive income.

#6 Monthly payouts with an annuity plan

If you’re seeking monthly payouts throughout retirement, you may want to consider purchasing an annuity plan in addition to developing your passive income portfolio.

You can acquire annuity plans from insurance firms in Singapore.

It is possible to choose between paying a single payment and ongoing premiums during your working years when purchasing an annuity plan. On attaining retirement age, this plan pays you monthly for the number of years mentioned in your policy or for the rest of your life, depending on the insurance you purchased.

Is this a familiar sound to you? That’s what CPF live (our national retirement annuity system) offers, and supplemental annuity plans can be added on top of that.

How much passive income do you need?

It would help if you got by. This is the amount of passive income you’ll need to achieve financial independence and early retirement.

To obtain financial freedom in Singapore, you’ll need US$3.23 million (S$4.3 million).

Depending on your lifestyle and retirement vision, this quantity of passive income will vary from person to person. Some people will need more money if they want to travel overseas frequently, for example. You’d also have to consider your financial commitments, such as paying for your child’s education and paying off your mortgage, into your calculations.

However, if you plan to live a modest and inexpensive lifestyle, your passive income doesn’t have to be significant.

Work your way backward from your desired level of passive income to determine how much investment capital (or rental income) is required to get there.

By way of an example, holding 96,000 shares of stock that pay $0.50 per share in annual dividends are required to generate $4,000 in monthly income ($48,000 per year). If a corporation’s shares are trading at $10 per share, that’s the equivalent of investing $960,000 in the company.

Investments with a Robo-advisor can lower your opportunity cost and make your money work in the meanwhile. Thanks to this method, your money will grow while you complete the essential steps to create a passive income stream.

Published On: September 30th, 2021 / Categories: Uncategorized /