Republished with permission from Brian Halim's blog, A Path to Forever Financial Freedom. Brian, who is in his late 20s, has a MBA degree and works as a finance manager.
How It All Started
Brian HalimI started off being quite wasteful.
After graduation, I maintained my interests in chasing the latest fashion and gadgets and did not quite know what to do with the income I earned from my job.
I signed up for an ILP product from Manulife and bought a WL policy, both of which I have since terminated, with the latter very recently.
One day, I decided that things had to change and I decided to go into investing after reading a couple of blogs which still exist today.
I set myself a huge goal when I started investing some 7 years ago.
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How It All Started
Brian HalimI started off being quite wasteful.After graduation, I maintained my interests in chasing the latest fashion and gadgets and did not quite know what to do with the income I earned from my job.
I signed up for an ILP product from Manulife and bought a WL policy, both of which I have since terminated, with the latter very recently.
One day, I decided that things had to change and I decided to go into investing after reading a couple of blogs which still exist today.
I set myself a huge goal when I started investing some 7 years ago.
The goal was to eventually reach a stage of financial independence, whereby my passive income is 1.5x of expenses. Other people have their own definitions of what financial independence means, of course.
1st Milestone - $250k
If I were to attribute a theme for the first stage, it would be Growth.
At the back of my head, I knew that I had to focus on something which could propel me to a head start in having a larger base. I decided that career growth in the first few years was extremely important and so I worked hard towards it.
It also helped that during the 2011 euro crisis I invested most of my money and recieved a huge return when the market rebounded.
But soon, I realized that investing wasn't easy and I continued to learn from mistakes. Thankfully, there wasn't any mistake which dragged down my capital base.
2nd Milestone - $500k
The theme for the second stage has to be Accumulation.
It took me 3 years to get from the first to the second milestone.
Both my career and investment seeds which I had planted have reaped fruits and are paying a nice dividend. I played my trump card fairly decently and it has given me a huge advantage.
The market has not seen a huge fall since 2008 and 2011 and I cannot say that I've done well without being mentally tested in the bear scenarios.
I think I have somewhat positioned myself for luck pretty well in the past few years and I have some huge gains which I have realized in the market which helps the portfolio to grow.
Over the last year, I have also cautioned and prepared myself for upcoming huge expenses I have had to incur for the family. I think my calculation was pretty accurate and it helps that I have not got surprises along the way.
$500K - Investment Breakdown
There were some readers who asked for the breakdown.
Out of the $500k in the portfolio, the capital cost came up to $312k while capital gains and dividends totaled $188k.
1st Milestone - $250k
If I were to attribute a theme for the first stage, it would be Growth.
At the back of my head, I knew that I had to focus on something which could propel me to a head start in having a larger base. I decided that career growth in the first few years was extremely important and so I worked hard towards it.
It also helped that during the 2011 euro crisis I invested most of my money and recieved a huge return when the market rebounded.
But soon, I realized that investing wasn't easy and I continued to learn from mistakes. Thankfully, there wasn't any mistake which dragged down my capital base.
2nd Milestone - $500k
The theme for the second stage has to be Accumulation.
It took me 3 years to get from the first to the second milestone.
Both my career and investment seeds which I had planted have reaped fruits and are paying a nice dividend. I played my trump card fairly decently and it has given me a huge advantage.
The market has not seen a huge fall since 2008 and 2011 and I cannot say that I've done well without being mentally tested in the bear scenarios.
I think I have somewhat positioned myself for luck pretty well in the past few years and I have some huge gains which I have realized in the market which helps the portfolio to grow.
Over the last year, I have also cautioned and prepared myself for upcoming huge expenses I have had to incur for the family. I think my calculation was pretty accurate and it helps that I have not got surprises along the way.
$500K - Investment Breakdown
There were some readers who asked for the breakdown.
Out of the $500k in the portfolio, the capital cost came up to $312k while capital gains and dividends totaled $188k.
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Time-weighted returns (including dividends |
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Year |
Portfolio |
ES3 |
|
2011 |
-4.39% |
-10.96% |
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2012 |
40.79% |
21.29% |
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2013 |
25.26% |
2.93% |
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2014 |
12.44% |
8.54% |
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2015 |
2.81% |
-10.59% |
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2016 |
22.35% |
3.08% |
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2017 |
8.61% |
7.97% |
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Overall |
159.02% |
19.58% |
It is important to me that I do not make huge losses in the market because that capital base of $312k could swing the other way if I were wrong in the market.
For instance, if my returns were negative 5% over the past 7 years, it would erode my portfolio to $296k. That would have been hugely detrimental.
I don't track my performance closely like a hawk but I do monitor them from time to time.
For me, as long as the value of the portfolio keeps growing, it feels like I'm doing something decent and right.
For instance, if my returns were negative 5% over the past 7 years, it would erode my portfolio to $296k. That would have been hugely detrimental.
I don't track my performance closely like a hawk but I do monitor them from time to time.
For me, as long as the value of the portfolio keeps growing, it feels like I'm doing something decent and right.
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Year |
XIRR (including dividends) |
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2011 |
-3.29% |
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2012 |
40.27% |
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2013 |
19.93% |
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2014 |
11.73% |
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2015 |
6.11% |
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2016 |
26.45% |
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2017 |
41.17% |
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Overall |
18.20% |
Maybe it will change someday.
What's Next? 3rd Milestone
I'm going to take baby steps at a time and not rushing in to hit my goal.
The next milestone for me would be to reach $750k and if history in the market could help, I am targeting to achieve the milestone in the next 3 to 4 years hopefully. With higher family expenses, I suspect the higher range of the 4 years but it doesn't matter too much to me at this point.
I think I've grown way more than simply hitting some financial goals.
Equally important to me would be to accumulate more life experience and I am more excited to see my 2 boys finally going to grow up in the next 3 to 4 years, which would allow the entire family to try something really out of this world. I think that's what we are going to go out for and that's why we are going for financial independence.
I do hope in the next 4 years I would be on the way writing about my 3rd milestone experience and looking back at the past 4 years of my life experience.
Thanks for reading.
