It is an aspiration for most people to be financially free. Being financially free means being able to do what one likes without being tied down to a job that one doesn't like. This is usually achieved by having alternative sources of income that do not depend on one's job, such as dividends and rental income. However, how much does one's financial independence depends on one's health?
When one is healthy, one is able to analyse financial statements or read technical charts and make investment decisions. However, when one is unhealthy, all these take a back seat. As La Papillion pointed out in his comments to my previous blog post, financial issues are the last thing on one's mind; the first thing being spending more time with one's family and trying one's best to recover as fast as possible. Investment decisions that used to be made fairly quickly now get procrastinated. If timing plays a key role in the returns one gets, then the returns become diminished with procrastination. Financial statements that used to be read with care now becomes a chore and an obstacle to investment. Thus, is it truly financial independence when it depends on a healthy person to achieve it?
One may argue that regular dividends and rental income require minimal efforts to achieve. However, one still has to watch over the performance of the companies to make sure that the regular dividends can continue uninterrupted. History is full of examples of excellent, high dividend-paying companies that have failed. Rental income also requires one to look for new tenants when the lease expires and to carry out repairs to upkeep the property. So, efforts are required to maintain the regular income. Nevertheless, this post is not to belittle the financial independence that some have achieved. Being financially free is a great achievement that takes many years of hard work and financial prudence to achieve. Rather, this post is to allow one to ponder how much one's hard-won financial independence is dependent on one's health. If one's financial independence is not dependent on one's health, then that financial independence could also be transferred to one's loved ones so that they too could be financially free.
I have not found an answer to how one can be truly financially free. But the closest thing to a company that can continue forever is an index, which renews itself based on economic trends and replaces outdated component stocks with new ones. And the closest thing to minimal maintenance of the investment portfolio is to create a regular savings plan which invests a fixed amount of money in the selected fund. The good thing about index investing is that it beats most of the actively managed funds.
Health is wealth. When one is healthy, one has the capital to be wealthy. But when one is not healthy, even wealth cannot buy health.
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Chin Wai, you hit the nail on the head. Think many didn't factor in that they do have a full time job and the amount of commitment, not to mention the deterioration of the ability to do active management on a consistent basis. Hence folks like property a lot. and renting is still one of the best passive sources.ReplyDelete
I wrote about the various difference in efforts required sometime ago (do let me know if i shouldn't link this) http://www.investmentmoats.com/money-management/how-to-build-wealthits-not-so-passive-as-you-think/
And i been searching for such a solution for the general. Andrew Hallam highlights one big problem in that, in the event if something happens to an active investor, will the skills be transferable to the spouse or family?
Thanks for sharing your post. Agree with you that there is no investment plan that does not require any maintenance.
Hello Chin Wai,ReplyDelete
I wish you all the best to your health.
I can see you are going through a paradigm shift process. You yourself know what's important and dear to you.
The positive thing is you have an early wake-up call. Some people only realise very late in life what really matters to them.
SMOL - the cherry blossom and grasshopper
Thanks for your well wishes.
Yes, looking on the bright side of things, I've learnt to be more empathetic and take less things for granted.