Tuesday, 26 August 2014

Calculating Your Dividends From Your Investments and Earning Better Interest on Your Savings?

So, I was at the gym today and suddenly something occurred to me.

Yeah, I get weird random thoughts all the time, so sue me.

Anyway, I was wondering when would my dividends pay off, so I did a little research.

Well, I won't go into too much details, so basically I went to SGX website. I found the following information.


In my previous blogpost, http://teenageinvesting.blogspot.sg/2014/08/index-investing-in-singapore-stock.html , I recommended that the average investor's portfolio should include a mixture of stocks and bonds. So naturally, I wouldn't recommend something that I wouldn't do myself.


As such, I had previously purchased 1 lot of ABF SINGAPORE BOND INDEX FUND ETF (A35) which is 1000 shares exactly. I have not yet received my dividends as you can see that they have not yet paid out the dividends.

If I should take last year dividend of SGD 0.023/share, I would roughly receive $23 in dividends this year if I'm lucky. (Senior Investors please correct me if I am wrong...) That's a whopping $23 in "interest". Could you earn $23 in interest if you place $1165 in the bank for a year? Even if I should take a dividend payout of 0.01, I would still receive $10 in that year.


For argument sake, let's take POSB Savings at their revised interest rate per annum from the previous 0.100% to the current 0.050%..........

At $1165/ year you would receive an interest of $0.5825.... that's barely $0.60.

The point I'm trying to make here is I don't expect to get rich by investments. If i do, I'm lucky. I believe that what I'm doing now, is merely preparing for the future. I want my money to work harder for me. $10 is significantly more attractive than $0.60. But the $0.60 is safe. It's guaranteed interest. But there's no guarantee that the interest rate will not fall somemore. Ten years down the road, it may even be 0.030, or 0.025% p.a? That's $0.25 interest in a year.

Would I take that $23 or even $10 to spend? I doubt so. I would much rather take my dividends, combine it with my monthly fresh funds, and re-invest it. Why not use the power of compounding to our advantage?

By the way, Fun Fact. The Singapore Government has given us a free $100 to use at public gyms and swimming pools. Simply sign up for an ActiveSG membership. I got my $100 and signed up for one year worth of off peak gym membership at $80 leaving me with $20 worth to use for peak hour gym sessions. If the government hands out free stuff, use it. Why not?


One thing's for sure, money is never enough. Everyone wants money. But money comes and go, your health is your own. As the saying by Jim Rohn goes, "Take care of your body, it's the only place you have to live."

See y'all soon. Take care.

Signing off,
Teenage Investor

4 comments:

  1. The thing about bonds is the coupon does get really fixed if you decide to hold till maturity and then you get back your principle. Unlike business the dividends might rise or fall over time depending on what type of business you are invested in.

    I suppose people who bought bonds in their allocation usually use it to counter their cyclical nature of stocks since they hv an inverse relationship with one another.

    ReplyDelete
    Replies
    1. Hi B, thanks for taking the time to read my blogpost!

      Yes I agree with you, I also view bonds as a way of protective measure against stocks which can be more volatile. In most cases I would assume when stock prices fall, value of bonds usually increase somewhat (?) correct me if I am wrong.

      Delete
  2. Never confuse saving with investment. Any investment by nature is risky.

    ReplyDelete
  3. Hi Createwealth8888, I get what you mean.
    What I'm trying to bring across is investing may earn better interest on your "already existing" savings. Not investing to save. Hope this clarifies :)

    ReplyDelete