I am always thinking about the best way to deploy our family capital to build new passive income streams. It is not as easy as it sounds. Especially when it comes to investing and reinvesting larger amounts of money. Well, in my opinion, investing is pretty simple as long as you have the necessary capital, do your homework, and know exactly what you are doing and why you are doing it.
As mentioned, in addition to Active Income, we invest all our savings into four money-generating asset classes to earn Passive Income. This passive income generates monthly and quarterly cash inflows from rent, interest, profit, dividends.
By the end of 2026, each Passive Income source is expected to bring us roughly RMB100,000 per year (~USD15,000 per year) giving altogether around RMB400,000 per year (~USD60,000). After December 31, 2026, we could easily retire early anywhere in the world joining the financial movement FIRE – Financial Independence Retire Early (FIRE).
Owning four different types of investments helps with diversification. Diversification of investments is important and necessary. For portfolio diversification to manage risk, these four Passive Income sources are independent from each other – being different asset classes, based in different locations, hold in different currencies, managed by different financial institutions and going through different market cycles.
Currently, my plan is to build wealth in four different currencies including Chinese RMB, Polish PLN, American USD and European EURO.
INVESTMENTS IN FOUR ASSET CLASSES TO GENERATE PASSIVE INCOME
If you want to have money, keep your money and grow your money, you got to get to work!
1. REAL ESTATE
Real Estate is well-established passive income source bringing in stable returns. Residential properties earn Rent.
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PURPOSE: Preserve large amounts of money and benefit from the growth of the Chinese economy, especially the real estate sector.
TYPE: Residential apartments with different number of rooms located in different communities around the city.
COUNTRY & CURRENCY: In China in Chinese RMB.
AMOUNT INVESTED: Several million RMB currently invested.
PERCENTAGE OF PORTFOLIO: 65% (Target: 40% ↓).
CAPITAL REQUIRED: Very large.
FEES TO ENTER: Very high around 3%-5%.
RETURNS: Around 5% on average after all property management fees, sporadic maintenance costs and TAXes.
RISK: Medium risk.
CURRENT PROGRESS: Already completed in 100% without the need of adding any large capital.
WORKLOAD: Time consuming.
FUTURE: In the short-term, no new investments are planned. In the medium-term, we need to buy another apartment to withdraw my wife’s Housing Fund. This can only be done by buying a residential property in the city where her household registration aka Hukou. In the long-term, we need to decide what to do with rental apartments – whether to keep them or sell them for cash and invest the money into the stock market.
EASE OF LIQUIDATION (turning into cash): Takes long time and difficult.
2. BANK DEPOSITS
Bank Deposits include making 3-year bank deposits over the period of three years, and then let them compound indefinitely. Long-term deposits earn Interest.
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PURPOSE: Hedge against market volatility instead of buying bonds.
TYPE: Different length of deposits hold in different banks.
COUNTRY & CURRENCY: In China in Chinese RMB.
CAPITAL REQUIRED: Very small.
AMOUNT INVESTED: A few million RMB currently invested.
PERCENTAGE OF PORTFOLIO: 35% (Target: 30% ↓).
CAPITAL REQUIRED: Very small.
FEES TO ENTER: 0.
RETURNS: Around 3% on average. There is no Individual Income TAX on bank deposits in China.
RISK: Low risk.
CURRENT PROGRESS: Almost done with 90% of the target achieved. Will be finishing at the end of this year.
WORKLOAD: Not time consuming.
FUTURE: In the short-term, I still need to add around RMB300,000 until the end of 2022. In the medium-term, I need to reinvest any expiring deposits, ideally at the highest saving rate than the maturing ones. In the long-term, some more money may need to be added for the purpose of portfolio rebalancing, or when interest rates increase.
EASE OF LIQUIDATION (turning into cash): Takes long time, but easy.
3. ONLINE BUSINESS
Online Business includes building the website by publishing quality content to gain readers globally. The website earns Profit.
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PURPOSE: Diversify from active income for the future.
TYPE: Different revenue sources including advertising, affiliate marketing, selling own products, etc.
COUNTRY & CURRENCY: In Poland in Polish PLN.
AMOUNT INVESTED: Only a few hundred PLN is invested in this website, mainly to pay for the domain name and server space. Instead of capital, I invest tons of my free time and mental effort.
PERCENTAGE OF PORTFOLIO: 0% (Target: Unchanged –).
CAPITAL REQUIRED: Extremely small.
FEES TO ENTER: Around USD100 per year.
RETURNS: I am focusing on generating RMB100,000 per year (~USD$15,000 per year). It is because the Returns From Investments (ROIs) in new websites are potentially extremely high reaching a few thousand percent.
RISK: Very low risk.
CURRENT PROGRESS: Achieved around 10% of the target.
WORKLOAD: Extremely time consuming.
FUTURE: Keep on investing my time and energy into growing SuperBusinessManager.com. As it only costs a few hundred PLN per year to pay for the server and renew the domain name registration, there will be no major capital expenditure in the future.
EASE OF LIQUIDATION (turning into cash): Long and difficult.
4. STOCK MARKET
Stock Market includes investing in the US on NYSE and NASDAQ. Stocks, ETFs and REITs earn Dividends.
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PURPOSE: Benefit from the growth of the American economy, especially the largest American companies.
TYPE: Owning three different types of marketable securities including dividend stocks, ETFs and REITs. The portfolio will include around 30 high quality stocks.
COUNTRY & CURRENCY: USA in American USD.
AMOUNT INVESTED: Nothing yet. The amount of money invested on the stock market will be gradually increasing every month starting from 2022/2023 until 2026. Most likely a few hundred thousand USD to be invested over the next three years.
PERCENTAGE OF PORTFOLIO: 0% (Target: 30% ↑).
CAPITAL REQUIRED: Low
FEES TO ENTER: Around USD0.35-USD1 per order.
RETURNS: Not planning to beat the market. I will be focusing on generating 4% per year from dividends while growing the portfolio steadily at 10% per year on average. I am counting on earning money both from dividends and capital gains, so my strategy is to focus on low risk and low volatility. I am interested mainly in companies that create value for other people, generate predictable earnings and cash flows while gradually increase in price over time and increase dividends as well.
RISK: Medium risk to high risk.
CURRENT PROGRESS: Still doing my homework to prepare myself, so the progress is 0%.
WORKLOAD: Time consuming.
FUTURE: I am planning to start off by investing a few thousand USD$ in the second half of 2022 to figure basic things out with my new brokerage account. Later, from January 1, 2023, I will be making more regular monthly investments purchasing small number of shares each time. I will be buying solid dividend stocks of American multinational companies at NYSE and NASDAQ as these two markets are the most liquid and the world’s best companies are traded there. I will be investing in a way that requires no effort from my side, so I can focus on building this website in my free time. Specifically, by buying quality companies and owning them for a very long time (minimum ten years), ideally forever. I am not interested in day trading, investing in others’ debt (bonds), speculating on bitcoin, freezing cash in art, or any other form of speculative behaviors.
EASE OF LIQUIDATION (turning into cash): Quick and easy.
In regards to how our family Net Worth is currently allocated, let’s say that our investments account for around 80% of our Equity while our primary residence in Zhanjiang (our home) accounts for the remaining 20%. I like this split actually – investing more when we are still relatively young to put our capital into hard work.
Honestly, I do see much benefits for my readers in writing any definitive numbers how much our Wealth is. Neither I want to do it publicly as I believe that private things in every family should be kept private. However, to give you some perspective how wealthy we are, I can say that the Net Worth of my family is somewhere in the range of USD$1,000,000–USD$3,000,000.
What is more important to me than making the exact number how much money we own public is that both my wife and myself were starting from USD$0. All of our wealth has been generated through hard work, reasonable spending, consistent saving and responsible investing. We are not trust-fund babies, neither we inherited nor were given large sums of money by our families.
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The above article represents my own views and attitudes as of July, 2022. It is not an investment advice. I am not an investment advisor. My articles have rather educational purposes rather than are advisory in nature.
Your money decisions are yours alone and I am not in any way responsible for your present or future actions. Stay on the righteous path, think long and long-term before making any financial decisions. And, remember to trade responsibly! More in DISCLAIMER.
