Declaration: This is a sponsored post with InvestorOne, a free online portal that focuses on Singapore stocks. They talk about stocks far more than we do – so if you’re looking to research individual stocks and REITS – you might wanna go there instead.
If you’re an active investor and have been scouring this site for stock tips over the past year we’ve been in operation, you most likely would have been disappointed.
This is an intentional decision we’ve made given our broad beginner audience. Yes, we are big believers in passive investing, particularly for people with a portfolio of $100,000 below.
Why? Because we’re all about doing the right thing at the right time.
The same way I would not recommend a 70-year-old retiree to upskill and earn more money, I would not ask a fresh grad with $2,000 in the bank to spend most of their time picking stocks either.
That said, there will come a time where it’ll make complete sense for one to pick and choose their stocks. Here’s why.
#1 When the Return on Time makes sense
Many young investors are obsessed with “Return on Investment.” I’ll throw one back at them – Return on Time.
Suppose it takes 1,000 hours a year to become a decent investor delivering 10% annual returns. Three investors with different portfolios sizes will have very different results for the same effort.
|Portfolio Size||Return on time, based on 1000 hours of research per year (around 3 hrs a day)|
|$5,000,000 Portfolio||$500 per hour|
|$500,000 Portfolio||$50 per hour|
|$50,000 Portfolio||$5 per hour|
When your Return on Time exceeds your hourly rate, it’s time to consider active investing.
Now, I know $500,000 looks very far away, but I’m optimistic that some of our readers will be able to reach it in this lifetime – especially for those of you who have started investing in your teens.
Being born into a non-sandwich generation and starting with zero debt will help immensely, but living below your means, continuing to improve your skills, earning power and having the grit definitely helps as well.
# 2 When your investment returns overtake your salary
No star shines forever.
We’ve seen this happen to the Boomers and Gen X. We’ll be foolhardy to assume millennials are impervious to obsolescence.
You might be able to attract a decent pay in your 20s and 30s, but in 10 years time, there will be some kid who’s younger, hungrier, smarter and more affordable than you.
The day I become irrelevant thanks to some genius tiktok-slaying Gen Z who can write, code, film, video edit, design and manage clients, the active investor in me will be fully prepared.
When the potential returns from your investments start to overtake your earning power, that is when it makes sense to spend less time on work, and more time on investing.
Kinda like how this Gen X finance blogger did.
Here’s a nifty table on how much you should aim to have if you want to be an investor full-time.
|Your current salary||The annual income you need to replace||Based on 10% return, how big your portfolio should be|
#3 When you need to manage the risks of passive investing
We love passive investing, and we’ll still be passively invested for at least the next 10 years. But I think it’s important for us to recognise the risks of passive investing as well.
Some of these include:
Passive investing works best for the SP500, but is less effective elsewhere
A lot of literature about stock picking failing to ‘beat the index’ is true. But a lot of this literature is also conducted in the US. In many other countries that lack the size and critical mass of the US economy, it’s a different story – and active investing might make more sense there.
(This is not to say you should sell all of your STI-ETF and jump straight into stock picking. Holding the STI-ETF is much better than wildly buying stocks without research, or not investing.)
A lack of control during long periods of stagnation
Many of us look at the US and think it’s an unstoppable juggernaut. But sometimes, the juggernaut lays down and slacks off for a few years.
That’s actually what the NASDAQ (another popular index in the US) did after the dotcom bubble in 2001. It took 15 years to recover to its previous peak.
If you are 25 years old – you can definitely wait out these 15 years as a passive investor. But if you are say, 40, or say 50 – that might be a lot riskier.
But what if I just want to stay as a passive investor?
Picking stocks is one of the ways of managing the risks I mentioned above, but it isn’t the only way.
Other methods for passive investors to deal with this include diversifying in other asset classes such as property, precious metals, lower risk vehicles and even crypto if you are brave enough.
Business is also one way people get rich without ever touching the stock market. And yes, yes, you can get a financial advisor/fund manager to help you out.
But let’s get one thing clear. All these solutions to manage your risk? They’re all challenging or have risk in some way. The idea here is to focus your efforts on the investment that suits your style best.
Picking Stocks and active investing? Then you better be ready to do the research.
Property? Be ready for those taxes and maintenance costs.
Crypto? Nothing is certain and security is also a concern.
Precious metals? You don’t earn interest or returns on those.
Business? Be prepared to pour every waking moment into it.
Even outsourcing to a financial advisor needs careful selection.
I wish there were an easy way, but control over your future life only comes to those who work for it. Preparing for an uncertain future has never been – and never will be – easy.
But trust me, it sure beats the alternative.
Stay woke, salaryman.
A message from our sponsor, Investor-One
I’ll be first to say that I don’t have $500,000 in my portfolio, but that doesn’t mean I can’t start understanding the principles of active investing. The more I know, the shorter time it’ll take for me to be an active investor, should the opportunity arise.
To that end, Investor-One has been pretty helpful.
It is a portal focused on Singapore-listed stocks content with quite a few content pillars. includes stuff like in-depth analysis, aggregating chatter about the company on social media, and reviewing the performance of various sectors.
There’s post/pre result analysis that takes a look at company and sector performance every quarter. Recently covered popular names like ParkWay Life REIT, Wilmar, iFast and Sheng Siong – so if you need a second, third or even fourth opinion, this is a page worth considering.
There’s also the ‘academy’ where it’s full of informative articles teaching you more about investing – including this one where I’m sure many of you will be interested about – whether there is a passive investing bubble.
For example, if you click search for SATS (SGX: S58), for example, you’d be able to see stuff like revenue growth, total investor return over three months to two years – so a lot more detailed than what you get if you just googled “sats stock” (which I always do).
It’s also a great starting point to see what others have written. For example, I found this article from Financial Horse telling me why he would not buy SATS. (Yikes, I bought SATS).
I should probably add now that it’s completely free.
So yeah, free information all in one place – what’s not to like?