Size does matter for income plays

When you buy computer software, especially games, there's a minimum PC requirements and recommended requirements. 

We quickly learn that it' best to ignore the minimum PC requirements...


If a person wishes to have a dividend income of $50,000 per year starting this year (notice I omitted the word passive), I guess the recommended capital would be $2 million dollars at 5% yield.

Wait!? My math don't add up you may say.    



Let's park this question for now and explore other alternatives:


1) $1 million at 5% yield

This will get you the $50,000 per year you so desired. But the price to pay is you are 100% all-in. No opportunity fund or dry gunpowder. No ballast.

That means you have lived through the May 2013 taper tantrum where have experienced how income stocks all got whacked in the head - some more than others. And you totally OK with the temporary capital loss. You are confident that your income stocks will recover eventually - like it did currently now. You speak with conviction as you have lived through that experience. You know what you are doing.

I would rate this strategy as minimum requirement to get $50,000 dividend income per year. 


2) $500K at 10% yield

That's obvious isn't it? And that's what newbie income "investors" normally chooses.

This stock is yielding 4% but this one one is yielding 8%... Buy the 8% one! Easy!

If only they stop and reflect for a while why they are the only "smart" ones who can spot it. I mean why other investors are bidding the price up for that 4% dividend stock and not biting on the one which is yielding at 8%??? Don't other investors (especially the institutional ones) know math?

These newbies have probably not gone through May 2013 taper tantrum, never mind to have experience what it means that hell hath no fury like an income investor scorned - like during 2008/09.

How to spot these newbie income investors?

Just ask 2 questions and you'll know:

a) What's the dividend payout ratio?

b) What's the dividend growth rate for the past 5 and/or 10 years?

You'll soon realise they are not income investors but yield hogs from the blank stares you've got...

It's the equivalent of a newbie trader who jumps into the market using 10:1 leverage and have no clue what is risk management!!!???

No, $500K at 10% yield is not a strategy; its a train wreck waiting to happen... 


$2 million at 5% yield for $50K 

I guess some of you have figured what it means and why it's recommended - starting this year.

For those who haven't figure it out, no worries. You will in due time. It will just cost you some money but trust me, that's how we remember what not to do in the future!

Single and Married

If you have appetite to see what divorced looks like - Single, Married, and Divorced.

It's the thinking about it which is hard

This post is dedicated to those who without knowingly, tends to whine, complain and moan a lot...

Of course we do not change simply by reading a story. But if one reader can pause and go, "Hmm.. I never saw it that way..." 

This post would have served its purpose. Namaste.




Story told by Ajahn Brahm - A British monk in the Thai Forest tradition of Ajahn Chah.

One of my stories was when we were building the main hall in my teacher Ajahn Chah’s monastery, there was a lot of earth left over and we had to move that earth from one place to another because Ajahn Chah, my teacher, said it didn’t look good over there.

It took three whole days of very hard work from 9 o’clock in the morning until about 10pm with hardly any breaks. We’d already eaten our meal for the day, and that was one day after the other in the tropical heat. When we were finished, we were very happy but then Ajahn Chah left for another monastery. The following morning, his deputy abbot came up to us and said he thought the soil was in the wrong place and we had to move it. So for another three days we moved it to another spot, and again I was very happy when it was all finished.

But the next day, Ajahn Chah came back and he said, ‘What did you put the soil over there for, I told you to leave it over here.’ And so for another three days we had to move the soil again. And of course by this time I was getting very angry and upset. And being a Westerner, in an Asian monastery, I could swear in English without anyone understanding. But they did understand because they could see my body language.

And I always remember one monk coming up to me and saying, ‘It’s pushing the wheelbarrow is easy, it’s the thinking about it which is hard.’ 

And that’s changed the whole perspective of what I was doing. As soon as I stopped complaining and moaning, it was easy to push that wheelbarrow, in fact it felt much lighter. 

And this is actually how I learned about the secrets, one of the secrets, of monastic life. Didn’t matter what you were doing, whether you were sitting for hours and hours and hours in your hut, whether you were working building a monastery, there’s a thinking about it which made it hard.