I love the concept of buying future income streams. To me, that is what early retirement is all about. Build sufficient future income streams until they cross your monthly living expenses.
If you are thinking about buying future income streams, there are a couple of options in Singapore.
One popular option is dividend investing. In Singapore, there are a couple of companies that issues regular dividends such as SingTel and SPH. If you want more options, there are more choices in US where companies such as Coke, McDonalds and even Apple are giving out regular dividend payments.The downside of buying dividend income is the low yield, which is around 3-5%. This literally means for every share you buy, you are paying 33.3 years worth of income. That is not attractive to me.
Another option is the Traded endowment policies. This is a financial instrument that allows one to buy over existing endowment policies from the previous owners. It started in UK but is now available in Singapore as well. The advantage to the new buyer is the reduced waiting time for the monthly payments to kick in while for the previous owner, it is a mean to cash out a lump sum of money. I have not invested in any traded endowment policies yet but I am doing a lot of research by talking to companies selling them. There is currently only a couple of such companies and liquidity is limited. On average, an investor can expect to pay 25 to 15 times of the annual returns.
Another option in buying income streams is through acquiring businesses. There are a number of marketplaces where you can buy either an online or offline business. On average, you will be paying about 2-4 years worth of future income streams. Online business are typically cheaper in terms of absolute prices as well as valuation. For example, in some cases, you can buy future incomes streams using 12 months worth of income. However. there is a higher volatility in buying an online business due to traffic changes. Having said that, high risk high expected returns. That is the investment area that I am focusing on now. If you are interested in buying online businesses, stay tune as I am preparing a resource guide for beginners. I will announce on this early retirement blog when it is ready.
The final option is property. If you take rental income as a form of income stream, then what you pay for the house can be expressed in terms of how many times the price is over the projected annual income. Of course, not all property investors see it this way. In fact, most are concerned with capital appreciation. However, if you are looking to buy future income, property investing is another option. On average, expect to pay around 16 to 18 years for a HDB and 20 to 25 years for a private condo in Singapore.