A recent addition to my financial management spreadsheet is the monitoring and forecasting of passive income.
This represents the income my assets yield from me sitting back and doing nothing, whether in the form of rental income, dividends or interest. By monitoring both my asset allocation along with the average yield on each asset class, it will help me to focus on portfolio optimisation, and finding the best return for my risk appetite.
What stands out straight away is the difference in yield on my different assets. My property is generating the highest regular income, at close to 5% against the current property valuation. Its a little early to have a good feeling about the average yield on my ETFs but i expect this to be at least 4% from dividends if not higher. My cash or near cash assets are earning just under 2% on average, which is reasonable given the current zero interest rate environment, but is below inflation and really re-emphasises my objective to reduce cash balances over the coming months.
My short term aim is to reinvest all surplus income into further asset accumulation (and thus further grow passive income).
My long term aim is to use passive income to remove my dependence on employment income, allowing much greater freedom in my employment and lifestyle decisions in the future.
Hi
ReplyDeleteA question - is the yield comparison between property and ETFs an apples to apples comparison? In Hong Kong, the property yield (presumably after expenses) is subject to tax while the dividend we receive are not subject to tax?
Cheers
traineeinvestor
Hi there
ReplyDeleteWhen comparing yield I try to factor in all relevant expenses and taxes, which can get a little complicated when dealing with more than one country. I tend to stick to investing in markets I either live in or have lived in, to keep my tax footprint as simple and manageable as possible.
In reality I suspect my property yield will be a little lower over time than at present, after vacant periods/maintenance costs are considered. Whilst I've been fortunate with these items to date, I assume that won't always be the case.
Thanks