Recommended stocks for small investors with 100,000 yuan: How to achieve financial freedom through financial planning?

Why Is Investing and Managing Wealth More Important Now?

As the year comes to an end, many people can sense a phenomenon: the rate of price increases far exceeds expectations. Egg prices have doubled, bubble tea and lunchboxes have risen by 20–30%, and mortgage rates have climbed from 1.31% during the pandemic to 2.2%. For a 10 million mortgage, this interest difference amounts to NT$89,000 per year. In this context, relying solely on a fixed salary is no longer sufficient to cope with rising living expenses. Investing and wealth management have become essential topics that everyone must take seriously.

However, investing is not difficult. Successful investors need three core elements: mindset, projects, and time. No matter how much initial capital you have, as long as these three are in place, wealth accumulation will grow like a rolling snowball.

The Wealth Management Path for Small Investors Starting from NT$100,000

Step 1: Establish the Correct Investment Mindset

Many people see saving their first NT$1 million as a milestone, but for recent graduates, it may seem too distant. Therefore, starting with NT$100,000 is more practical.

The primary principle of investing is to use idle money—funds that won’t affect daily life expenses. Because the value of investment targets does not increase linearly but fluctuates in waves, being forced to sell at a loss during a downturn can severely impact long-term returns.

This is why keeping track of expenses and cash flow planning is crucial. Manage yourself like a business, clearly monitor income and expenses, identify areas to increase income and cut costs, and estimate a stable amount of investable funds.

Step 2: Choose Suitable Projects Based on Personal Situation

Different life stages suit different investment strategies.

For employed individuals: Stable income is an advantage. They are best suited for regular, fixed investments in financial products, avoiding frequent concern over price fluctuations, and not affecting job performance.

For high-income professionals (such as doctors, engineers): With ample salary, focus on long-term compound growth rather than short-term gains.

For those with plenty of time (students, salespeople): Use the advantage of time to engage in short-term operations, leveraging market hot spots and current events to achieve rapid appreciation.

For retirees: The goal is to generate stable cash flow from assets to cover daily expenses.

Step 3: Set Clear Investment Goals

Blind investing is hard to sustain. Investment goals should be linked to actual expenses, i.e., “find income for expenses”.

Suppose you need to pay fixed costs like NT$600 for phone bills or utilities each month, or plan annual travel and shopping. Then:

• Monthly fixed expenses (e.g., NT$600 for communication): Choose monthly dividend funds or high-yield stocks. Many funds pay dividends of 7–8%, so NT$100,000 principal yields NT$7,000–8,000 annually, NT$600–700 monthly, just enough to cover communication costs.
• Large annual expenses (e.g., NT$30,000–40,000 for a phone or overseas travel): Require NT$100,000 to generate 30–40% returns, demanding more effort.

For the latter, arbitrage strategies can be effective. For example, deposit funds in a bank to buy USD earning 5% interest, then use the USD as collateral to borrow TWD at only 2% interest, cycling the process.

Investment Strategies for Different Groups

Stable job, seeking steady cash flow

Suitable for investing in dividend funds or high-yield ETFs, which align with stable income sources and can generate consistent cash flow. Although spending all dividends may forgo compound growth, the advantage is quick returns and easier persistence.

As long as the time horizon is long enough, accumulated dividends can even surpass the salary, effectively creating a “monthly pension” for oneself.

High-income groups, focusing on long-term appreciation

Index ETFs are ideal. For example, 0050 tracks Taiwan’s top 50 companies by market cap; SPY tracks the 500 largest US companies. These indices automatically implement “weed out the weak, keep the strong”—when companies decline, they are removed; when new companies rise, they are included.

Over the past 100 years, the S&P 500 has averaged an annual return of 8–10%, far surpassing the 5% yield of US dollar deposits. Investing NT$100 for 10 years at 10% annual return yields NT$236, while at 5%, only NT$155—almost doubling the principal.

However, the stock market carries risks. The dot-com bubble in 2000, the 2008 financial crisis, COVID-19 in 2020, and the inflation crisis in 2022 all involved significant declines. Although markets recovered and even reached new highs afterward, investors needing liquidity during downturns may be forced to sell at a loss. Therefore, this strategy is more suitable for high-income individuals with strong risk tolerance.

Real estate investment is also worth considering. For example, a NT$10 million property appreciates to NT$12 million in five years, earning NT$2 million, a 20% return. But if only NT$2 million is paid as a down payment and the rest is financed, with annual interest of NT$20,000, after five years, deducting interest costs yields a net profit of NT$1 million, a 50% return. This illustrates moderate leverage can significantly boost returns.

When young and with less capital, the cost of re-entry is lower. You can increase turnover and leverage on promising assets, making asset appreciation much faster than expected.

Time-rich but income-stable

This group should shift their mindset: instead of waiting for time to accumulate wealth, they should use turnover rate to enhance returns. Their time is mainly spent on data collection and trend analysis, rather than long-term holding.

For example, when the US interest rate hike cycle is nearing its peak, a future decline or QE is inevitable, increasing dollar supply. Shorting the dollar has a high success rate. A declining dollar also stimulates cryptocurrency rises, making long positions in digital assets a good choice.

The stock market still offers “theme speculation” opportunities. When the government announces opening up to mainland tourists or tourism industries enter growth phases, related concept stocks tend to rise. AI concept stocks have also surged in this context. By monitoring news and current events to predict major capital flows, following the trend to profit is speculation—earning from market over-optimism or pessimism.

Practical Analysis of 5 Investment Targets

Gold: Inflation Hedge Tool

Gold pays no dividends; all gains come from price differences. Over the past 10 years, gold has increased by 53%, an average of 4.4% annually, effectively countering inflation and currency depreciation. Its safe-haven attribute is especially prominent during economic instability.

Gold prices surged mainly from mid-2019 to mid-2020, and again from 2023 to 2024, driven by COVID-19, US rate cuts, and the Russia-Ukraine war.

Bitcoin: High-Volatility Speculative Asset

Bitcoin has surged dramatically over the past decade, but its price drivers are not easily replicable. Past negative factors included exchange failures; positive factors include increased cross-border remittance demand due to geopolitical tensions and demand for alternatives amid dollar depreciation.

As of the latest data, Bitcoin price is $93.28K, down 1% in 24 hours. In the short term, factors like halving events, spot ETF approvals, and Trump’s election support bullish momentum. Suitable for short-term trading. For long-term, it’s better to buy at lows and reduce at highs, and not allocate too high a proportion of total assets, given its volatility.

ETF 0056: High Dividend Strategy

0056 is Taiwan’s most well-known high-dividend ETF, mainly investing in high-yield stocks. Over the past 10 years, dividends have accounted for 60%, and stock prices have risen 40%, roughly doubling assets.

Expected returns over the next 10 years are similar to past performance, as Taiwan stocks maintain a stable dividend yield of around 4%. If NT$100,000 is invested annually and dividends are fully reinvested, after 13 years, annual dividends can reach NT$100,000; after 25 years, NT$220,000—becoming a stable passive income source.

ETF SPY: The Power of Compound Growth

SPY tracks the US S&P 500, with a low dividend yield (1.6%, after tax 1.1%), mainly deriving returns from asset appreciation. Over the past 10 years, its price increased from 201 to 434, a 116% return.

Key data: NT$100,000 invested for 10 years grows to NT$216,000, with an average annual dividend of NT$1,100. Continuing to invest for 30 years, the initial NT$100,000 becomes NT$1 million, and total invested principal reaches NT$3 million, eventually growing to NT$12.23 million—showcasing the power of compound interest.

The downside is limited cash flow during the period, so overall, it relies on asset appreciation. Suitable for those with stable income and no short-term expenditure needs.

Berkshire Hathaway Stock: The Holy Grail of Compound Investing

Owned by Warren Buffett, its profit model is replicable and sustainable. Mainly through insurance companies accumulating cash for arbitrage—e.g., issuing Japanese bonds at 0.5% annual interest to buy Japanese stocks, with the interest spread as profit; or issuing US savings bonds to fund 30-year government bonds, earning stable returns as long as the interest spread is sufficient.

Key advantage: even if Buffett passes away, this business model can continue, with stable growth in returns. If you want all earnings to compound, BRK is an excellent choice.

Core Principles for Small Investors Choosing Stocks

Most of the above investment targets can be participated in with just a few thousand NT dollars, whether through regular fixed investments or one-time speculation—very accessible. Time is the best partner for compound growth.

Regardless of the strategy chosen, the core requirements are: having the correct investment mindset, selecting suitable projects, and patiently waiting for compound effects or spending time researching entry points. This is the perfect embodiment of “mindset, projects, and time.”

With all three in place, the goal of becoming a small millionaire or small billionaire is just around the corner.