When it comes to investing for passive income, the size of your investing capital matters - a lot!
Simple maths will tell you:
Passive Income_____ROI____Investment Capital required
$50k_____________5%_____$1,000,000
$100K____________5%_____$2,000,000
$50k_____________4%_____$1,250,000
$100k____________4%_____$2,500,000
$50k_____________3%_____$1,670,000
$100k____________3%_____$3,340,000
For us as we are approaching retirement, we started to move towards less risky investments which unfortunately comes with lower ROIs. Quite a big proportion of our investment capital are in low yield but very safe investment instruments such as AAA bonds,
CPF and SSB. While those sums that were already invested in the stock market are still kept there to generate dividend income.
Even with this mix, we were able to achieve $165k in passive income, which enables us to save 100% of our salary.
Unless one is born into a wealthy family, building up a sizeable investment capital takes time (decades) and discipline. A strong will power to resist lifestyle inflation when your salary increases and when your passive income grows! It has been a 33 year journey for us thus far.
A lot of discipline, sacrifices, yes, but also a lot of satisfaction when you see target after target being achieved.
We do reward ourselves once in a while, for example when our passive income hits $40k, we treated ourselves to a long enjoyable holiday to the US. When the passive income hit $120k, we bought ourselves a new car with it. Felt very good that we didnt have to "work" for that car!
But mostly, we reinvested our passive income to allow the magic of compounding to work.