The Power of Strategy in Finance and Retirement Planning - 2025-03-07

Strategy is crucial because resources are often limited, yet our goals require careful planning to achieve them. A well-defined strategy involves setting clear objectives, prioritizing actions, and effectively using available resources. It is a roadmap that guides us toward our desired outcomes, whether in business, personal growth, or financial security.

A strategy can be intentional or evolve over time as we adapt to changes in our environment. Strategic planning and strategic thinking help ensure that our efforts align with our long-term vision. This is particularly important in financial planning and retirement preparation, where disciplined decision-making plays a critical role in achieving financial independence.


Applying Strategy to Finance and Retirement

Achieving financial security in retirement requires a clear goal. For me, the goal is simple: to accumulate a sufficient pool of wealth that covers my daily expenses after retirement. I have estimated that I need an annual income of S$50k, with an additional S$20k buffer for unexpected costs.

The next step is determining how to reach this financial target. There are several options: investing in rental properties, buying a business, or investing in the stock market.

After careful consideration, I ruled out buying a business—it requires too much effort and comes with a high risk of failure. Similarly, managing rental properties does not appeal to me due to the complexities of dealing with tenants. Instead, I found inspiration in legendary investors like Warren Buffett and Charlie Munger, who built their wealth through stock investments. Since investing aligns with my passion for research and reading, it became my preferred path.


My Investment Strategy

With a financial goal of S$70k in annual returns, I calculated how much I need to save and invest. If I achieve a 10% annual return, I must invest S$20k per year for about 18 years. By following this plan, I am confident I will accumulate around S$1 million, generating a sustainable return of S$70k per year.

The power of compounding assures me that if I remain consistent and patient, I will reach my goal. I remind myself that slow and steady wins the race—much like the tortoise in the classic fable.


Executing My Plan

Initially, I focused on a dividend strategy—investing in companies that offer 7% to 8% dividend yields while hoping for additional capital appreciation. Over the past 4-5 years, I have gradually adjusted my approach, shifting toward high-quality companies that may offer lower dividends but provide better long-term growth potential.

Currently, 66.7% of my returns come from dividends. At first, my capital gains were negative, as my Hong Kong stock investments declined significantly. However, after enduring 6-7 years of low returns, my portfolio rebounded sharply in under a year. This experience reinforced my belief in long-term investing.


Why Strategy Brings Peace of Mind

Having a clear strategy gives me confidence and peace of mind. I do not speculate on low-quality stocks, and I am prepared to weather market downturns. I trust the process, knowing that time and discipline will ultimately lead me to my financial goals.

A solid strategy is like a map—it guides us toward our destination while allowing for adjustments along the way. When life throws unexpected challenges, a well-thought-out plan provides stability and direction.


Final Thoughts

I encourage you to develop a strategy not just for your finances, but also for your personal life, family, and relationships. Having a clear plan gives you confidence and the ability to recalibrate when necessary. No matter the obstacles, staying focused on your goals will help you navigate life’s uncertainties with greater assurance and success.

Comments

Post a Comment

Popular posts from this blog

Reflections on 13 Years of Investing: A Wake-Up Call in 2024 -2025-01-28

After 13 years of investing, countless theories, and extensive study, the year 2024 has been another wake-up call for me. Looking back, my approach to long-term investing in the past was, in reality, still short-term and speculative. I would sell stocks when I believed their prices were too high, trying to time the market. This behavior, though seemingly logical, was speculative in nature. Warren Buffett’s teachings have made it clear that true financial growth comes from holding onto good companies for the long term. It’s important to remember that when we buy shares, we’re not just buying numbers on a screen—we’re buying a piece of a company. There are two ways to make money from the market: Speculation: Selling to someone willing to pay more than you did. Ownership: Earning profits as the company grows and performs well. Warren Buffett has shown us that while the first method can help accumulate an initial pot of gold, it’s not sustainable. It requires constant effort, exceptional f...
Read more

Property market - 2024-03-15

I came across an article claiming that China’s property market will be fine. The article cited a shrinking population, which could lead to more people concentrating in cities, creating demand for housing upgrades. It also pointed out that the average house size is still relatively small. The article seemed promising, suggesting that property developers are a good investment option. But hold on—why are China’s property developers going bankrupt? The article fails to address the real issue: property developers have taken on a massive amount of debt! Overleveraging can be disastrous if they are unable to sell properties, collect payments, or face project failures. It’s dangerous to rely solely on market analysis like this, as it won’t necessarily lead to success. We need to conduct our own analysis. If a company is overly reliant on debt to fund its operations, it will struggle when the economy worsens, and income drops. We should focus on individual companies that don’t depend on borrowi...
Read more

Rethinking Everyday Habits: The Lesson of the Towel - 2025-01-28

My big, fluffy towel. It was practically a family traditional. My mom used one, I used one – it was just the towel. Sure, it was a bit of a pain. After a wash, it took forever to dry, and packing it for trips was like wrestling an octopus into a suitcase. But hey, that's just how it was. For 40+ years, I never questioned it. It was my towel, end of story. Then, one day, I had a moment of… towel enlightenment. I decided to try a smaller towel. And guess what? It was perfect . Compact, quick-drying, easy to wash. Suddenly, travel became a towel-packing breeze. I could even clip it to my bag to dry! It was a revelation. Forty plus years I used a giant towel simply because that's what I'd always done. It hit me: Just because we've always done something a certain way doesn't mean it's the right way, or even the best way. My towel epiphany taught me a valuable lesson. Sometimes, we need to stop, take a look around, and ask, "Is there a better way?...
Read more