In our country, many robust companies listed on Bursa Malaysia churn out - with great regularity — dividends

DO you often feel like the main way you keep track of the passage of days through each calendar month is by when your bills and loans must be paid?

If so, you are not alone. Far too many of us focus on that vital day at month-end when our salary is banked into our savings or current account by our employer.

We then see chunks of our money flow out at different points of the month to pay our mortgage, car loan, credit card bills and perhaps even personal loans.

There is nothing strange about living that way. It is, after all, what we do in this 21st century of ours.

Still, I do think there is something tragic about our marking the passage of time (which is really also the passing of our lives) mainly by the outflow of money.

Personally, I would much rather put in place a “life chronometer” that ticks in tandem with inflows of money. Wouldn’t you?

Sadly our inflow of active income is usually limited to that once-a-month payday. This salary is our main — and for most people — our only source of active income.

If however, we manage our active income well by spending less than we earn and then saving and investing the difference for a long time in a so-called portfolio of wealth, we can engineer and bring about a far more frequent inflow of passive income into our bank accounts, and thus our lives.

This passive income can flow to us in the form of interest, coupons, dividends, distributions and rental.

Financial freedom

To attain the happy state of financial freedom, we need to focus on curbing our appetites and thus limiting our normal expenses each month.

When we reach the point of having our total passive income every month exceed all normal expenses, we would have attained financial freedom.

It would then be up to us if we choose to continue working for our salary (our active income) or not!

There is something liberating to the human spirit in not being forced to keep toiling at a job we hate.

To reach financial freedom means to no longer have to work for money. Yet work itself, if it is the right sort for us, is one of life’s greatest blessings.

Therefore, I believe we all owe it to ourselves to aim to reach the point of being able to work at a vocation we choose for ourselves and which is solely based on a high calling or is pursued out of love, passion and compassion.

To help us reach that high point of elevated self-actualisation, I like the idea of investing in equities (stocks) and in equity funds (stock-based unit trust funds) that spin out cash dividends from excellent stocks and that pump out fund distributions fuelled by dividends flowing from a range of high quality stocks within the fund.

To my mind, this is the best way of transitioning from working for money to having money work for you.

Malaysians are particularly fortunate because we live in a great (yes, by no

means perfect, but undeniably great) country which boasts a rich, diversified economy.

In our country, many robust companies listed on Bursa Malaysia churn out - with great regularity — dividends that flow into the bank accounts of savvy investors.

Bear in mind, though, not all companies pay out dividends. Some have financials that are too weak to permit doing so; others are immensely strong yet are led by management teams that prefer to keep excess cash in-house so they may better weather future uncertainties and invest in additional growth initiatives.

Learn about dividends

Personally, I prefer companies that pay out healthy, rising dividends from one year to the next yet still retain enough cash in-house to fund viable expansion plans.

So if you have the skill set needed to analyse the long-term health of a vast array of dividend yielding stocks so as to identify those that merit making your personal shortlist of 10 to 20 great dividend payers, then I recommend you gradually accumulate shares in those stocks.

Sadly, most people lack the skills or the interest nor the stamina and focus to succeed at this game across the 15 to 30 years it takes to achieve financial freedom via this scenic route.

If you think you might be a candidate to succeed in this challenging marathon then you should learn more about dividend mechanics by reading my online article Why Bother with Dividend Investing at

But if you lack any element of that extensive skill set I just outlined, yet still want to excel at dividend-based investing then I suggest you buy regularly into a dividend-focused fund.

However, it shouldn’t be your only unit trust fund because you ultimately want to build a multi-fund portfolio that is diversified across what I consider to be the three key dimensions of diversification: different asset classes, different geographic regions, and throughout a lengthy timespan.

I trust you can utilise one of those two approaches — investing directly in dividend stocks or indirectly through a dividend fund — or perhaps both, to help propel you on your sojourn towards financial freedom.

Rajen Devadason, CFP, is a Securities Commission-licensed financial planner, professional speaker and author.

Read his free articles at Connect on, and Twitter @RajenDevadason

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