This post was written in collaboration with Syfe. While we are financially compensated by them, we nonetheless strive to maintain our editorial integrity and review products with the same objective lens. We are committed to providing the best recommendations and advice in order for you to make personal financial decisions with confidence. You can view our Editorial Guidelines here.
Having a steady flow of passive income that’s enough to support your monthly expenses is everyone’s dream. For one, it means that you don’t need to work like your life depends on it — any revenue stream that requires active work can now be channelled 100% into your savings.
Also, like its name, passive income is money that you can earn with minimal effort. Sure, you may need to do the initial legwork or check on your investment from time to time; but other than that, you earn the money even while getting your beauty sleep.
Passive income can be a cosy financial cushion, but it’s different from say, running a side hustle such as a home based baking business or earning money from your Instagram posts. In the 2 examples, you’re still doing active work to earn money (baking and creating content), while passive income is effortless.
True passive income
So what is true passive income? This tends to be generated from investments such as dividend stocks and Real Estate Investment Trusts (REITs). Depending on the type of stocks/REITs purchased, these could range from being less risky to riskier.
In land-scarce Singapore, property is always in demand, hence many wax lyrical about the dividend income potential of REITs (short of being a landlord, for which you’ll need a truckload of money and the patience of sourcing for and dealing with tenants, property agents and much administrative work).
One such platform through which you can invest in REITs is roboadvisor Syfe, which offers a REIT+ portfolio that holds Singapore’s top 20 largest REITs. This includes well-known REITs like Ascendas REIT, CapitaLand Integrated Commercial Trust and Mapletree Commercial Trust. We recently wrote about how it’s possible to work towards amassing a dividend of $1,000 a month with Syfe REIT+, while paying a low annual management fee, no lock-in period and no minimum investment needed.
- Annual Management Fees
- 0.35% - 0.65%
- Minimum Deposit
- S$0
- Platform Fees
- S$0
This time, also using Syfe’s REIT+, let’s look at what sort of passive income one can achieve with an initial deposit of $1,000 and monthly deposits suited to your comfort level.
Assuming you’re 25 years old and wish to retire early at 50, how much monthly passive income can you expect from your REIT+ portfolio? Let’s find out~
Let’s start investing — 3 scenarios
With commitments left, right and centre, not many of us have a lump sum of money lying around to be invested.But that’s okay! You can invest in REITs with no minimum investment needed using Syfe REIT+, so let’s just begin with $1,000 and regularly invest a comfortable amount each month.
If you strike the lottery or somehow inherit money, you can contact me at— I mean, you can always put that sum into your REIT+ portfolio to supercharge your dividend generation and passive income power.
Although past returns don’t guarantee future performance, Syfe REIT+ has delivered an annualised return of 9.1% over the past eight years. In 2020, it generated a dividend yield of 4.5% and Syfe estimates the yield in 2021 to be 5.1%.
Using Syfe’s portfolio projections, let’s see what happens. If you want to explore how other investment amounts will alter your future dividend income, you can create your own Syfe REIT+ projections here.
Scenario 1: Small and steady deposits
The plan
| Initial Deposit | $1,000 |
| Monthly Deposits | $100 |
| Duration | 25 years |
Calculation projection using Syfe REIT+
*Projections are based on Syfe’s 100% REIT portfolio. The forecasts are calculated based on forward looking Monte Carlo simulations and takes into account projections for future dividend yields and capital appreciation, which may vary year on year.
Based on this investment plan, your Syfe REIT+ portfolio is projected to grow to $97,283 after 25 years. Assuming a 5% dividend yield, this sum will provide $405 in monthly dividends — a pretty decent supplement to your early retirement income needs.
Scenario 2: A middle of the road approach
The plan
| Initial Deposit | $1,000 |
| Monthly Deposits | $500 |
| Duration | 25 years |
Calculation projection using Syfe REIT+
*Projections are based on Syfe’s 100% REIT portfolio. The forecasts are calculated based on forward looking Monte Carlo simulations and takes into account projections for future dividend yields and capital appreciation, which may vary year on year.
Based on this investment plan, your Syfe REIT+ portfolio is projected to grow to $460,540 after 25 years. Assuming a 5% dividend yield, this sum will provide $1,918 in monthly dividends thereafter — more than enough to cover your monthly basic income needs as found in the 2019 “What’s Enough” study.
Scenario 3: Supercharge your passive income
The plan
| Initial Deposit | $1,000 |
| Monthly Deposits | $1,000 |
| Duration | 25 years |
Calculation projection using Syfe REIT+
*Projections are based on Syfe’s 100% REIT portfolio. The forecasts are calculated based on forward looking Monte Carlo simulations and takes into account projections for future dividend yields and capital appreciation, which may vary year on year.
If you follow this investment plan, your Syfe REIT+ portfolio is projected to grow to $914,614 in 25 years. Assuming a 5% dividend yield, this sum will provide an impressive $3,810 in monthly dividends thereafter. This should give you the freedom to enjoy your early retirement to its fullest.
Patience and perseverance pays off
The above examples show that even with a modest initial investment of $1,000, with patience and perseverance, you can attain monthly dividends of ~$400 and even up to ~$3,800, assuming a 5% p.a. dividend yield.
Syfe’s REIT+ portfolio also allows you to manage risk further with a Risk Management option. This means that instead of investing in 100% REITs, some of your portfolio goes into bonds, which is known to be more stable due to lower risk and lower returns.
It’s also nice to know that even with your initial $1,000, you can gain diversified exposure across sectors from retail to industrial, to data centres and business parks. You see, as different REITs manage different types of properties in various sectors, it’s difficult to pinpoint which REIT sector is going to outperform at any given time. Diversification means that even if one sector isn’t doing too well at the moment, the others could help you ride out the investment.
For those who wish to DIY but seek diversification, it can be more difficult and much costlier. They’ll need to manually pick each individual REIT, then purchase a lot (100 shares) of each REIT, paying all the individual fees. To rebalance the portfolio, there’s a lot of active management involved. On the flipside, Syfe’s investment experts will rebalance your REIT+ portfolio for you, without additional cost.
Another investment option: Syfe’s new Global Income portfolio
If you prefer the stability of bonds, Syfe is launching a new high-yield bond portfolio from 6 Sept 2021, called Global Income, which is one of the Syfe Select themes. It has a gross target yield of 4.25% p.a.*, which is pretty decent for bonds!
*Syfe internal backtested data, Blackrock. Yield is calculated as per the distribution yield from the underlying fund factsheets as of 30 June 2021
Overall, the risk level of the Global Income portfolio is relatively lower risk than Syfe’s 100% REIT+ portfolio (because it’s bonds, after all!).
Similar to REIT+, there’s no minimum investment amount and no lock-in period. It comprises both investment grade and high-yield corporate and government bonds. Those looking at geography would be interested to note that there’s a significant allocation to emerging market (EM) bonds, such as those from China, Mexico, Indonesia and the United Arab Emirates.
More details of the Global Income portfolio will be announced on 6 September 2021, so do keep a lookout!
- Annual Management Fees
- 0.35% - 0.65%
- Minimum Deposit
- S$0
- Platform Fees
- S$0
Ready to start earning truly passive income with Syfe REIT+ and the upcoming Syfe Global Income portfolio? You can quickly sign up for a Syfe account online through the MoneySmart portal. Account creation can be done immediately with Singpass and you can deposit funds immediately once that’s confirmed.