REIT-TIREMENT - REITs Investing & Personal Finance

A blog about REITs investment & personal finance

Saturday, January 12, 2019

How to Come Out a Simple Dividend Investment Plan

As mentioned in previous post, one should first access their financial situation and plan before one start your investment journey. The fund for investment should be money that you do not require within short to medium term, like 3 to 5 years.

I recommend to plan using Google Sheets because it allows you to access it anyway anytime with internet connection. This plan would allow you to have a clear picture which will reflect the S.M.A.R.T. goal that you've set.

I would recommend to plan investment in period of quarter instead of year for better progress tracking. Investment time frame should be long as compounding effect require time to work. Rule of 72 is commonly used to estimate investment doubling time. Take a 6% dividend example, let's say we re-invest all dividend, then our investment sum will become double in (72/6) = 12 years. Continue to do it for another 12 years, the investment sum would become 4 times of initial capital. So it is important to start investing as early as you could, not only when you have a lot of capital.

Now, for a start, let's set quarter target of $3000 capital and 1.5% dividend throughout 30 years. Below is a basic template to start with, green column are target that we set:


From above example, you can see quarter dividend exceed capital injection at 2035 Q4, which at this point, you get more than you invest. However, if we want to enjoy the fruit of compound interest, we should re-invest all those dividends.

Next, let's adjust for dividend re-investment. This time, the target capital would be increased yearly to account for dividend received amount (on top of existing $3000 capital) and target dividend growth set to 0.25%.

This time round, you can see the effect of compound interest. The dividend you would receive is around 3 times from previous example. Let's look at 2048 Q4, total dividend receive is 667k vs capital of 982k. Isn't it great that 2/3 of your invested sum is financed by your dividend ?

If u delay your investment journey by 1 year, then what you lost is the final year of fruit. From the above, the final year dividend is 62k, which is close to 5 years of initial capital. This shows that the time horizon is important in investing, capital is secondary.

Now we have done the planning step, we then would need to add few columns to track our actual progress. Below is the template that added actual value in blue column.

You could copy this template through this link. Once open, click file then make a copy.
File -> Make a Copy
All 3 examples are in there, feel free to modify to suit your need. Try tweaking around those figures to create an investment plan that can cover your expenses with dividend. If your goal is too far away, you may need to consider to increase investment capital amount and lower your expenses. Most importantly, start now.

Lastly, in every quarter end, update your actual result and check against your target.Circumstances change from time to time, you need to revise your target regularly.
Do contact me if you need any clarification or help. If you find this useful, share with your friends and families.

5 comments:

  1. Hi Vince, Great guide for young investors.. Compounding is really powerful in your strategy and other areas of life as well.. Thanks for the post. 😀

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    1. Thanks for your comment, please share to your friends if you find it useful

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  2. A good way to begin investment in REITs! Anything without a plan, is a plan to fail.

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    1. Have to be discipline and stick to it. Review it from time to time

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