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Early Retirement Masterclass 2019 Performance Review

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In every Early Retirement Masterclass, students will create two portfolios, a blue-chip portfolio and a dividend income portfolio.

The objective of teaching students how to build a starting portfolio is not to beat professional fund managers but to decrease portfolio volatility and risk. We want to lose as little money as possible and we want stability in our portfolios.

We pay greater attention to stability and risk because investing is a psychologically painful endeavour. One must be able to endure significant temporary losses in order to emerge a winner. During the depth of the 2008-2009 recessions, my personal portfolio was down over 50%. If I has sold out my holdings then instead of holding on and waiting for the eventual recovery, I would not be a millionaire today.

Next, getting some dividends trickling into their bank accounts also act a source of motivation to stay invested in the markets.

Get a sneak peer at my Early Retirement Masterclass

  • Qualifications include a Juris Doctor(Cum Laude)
  • Bachelor in Engineering from NUS (1st Class Honours)
  • Masters in Applied Finance also from NUS.
  • CAIA, FRM qualifications and passed all three CFA examinations.

My dividends surpassed my living expenses when I was 32. I retired when I was 39 on an average of $9-$11,000 worth of dividends each month.

As a special stipulation, every class will see at least $10,000 of trainer fees invested in a leveraged portfolio into the portfolio built by the class. This is to ensure skin in the game. If the class is not taught well, the trainer gets hurt first.

This is monitored by the ERM Facebook community which only students have access to.

This is a unique feature of the course, in that it eliminates the conflict of interest between the trainer and the student.

By design, the person who suffers first when the student is not taught well will be none other than the trainer himself as he loses money in the portfolio built. Applying a leverage of x2 makes losses twice as painful. So I am well motivated to ensure my students are taught well.

The course has been running since September 2018 and results in 2019 has been nothing short of fantastic so far.

Students across 10 batches have shortlisted 43 counters that have since been invested in a leveraged portfolio. These 43 counters are a combination of STI bluechips, REITs, and business trusts – investments that a beginner can easily own as they are recogniseable brandnames in Singapore.

Results recorded on Stocks Café in 2019 are as follows :

The XIRR which is the unleveraged internal rate of return across portfolios built by all batches of students is 15.73%. In practice, assuming a 3.5% financing fee, returns for the leveraged portfolio is [(15.73% x 2) – 3.5%] or 27.96% – a significant number. The capital gains and dividends alone can almost cover the trainer fees for one extra batch of students. If you invested with $10,000, (our recommended starting capital), you would have easily paid the course fees and still could have gone wild in Singapore with a 5 star hotel. I don’t need to elaborate on what you could have done with $100,000 capital. Your gains of $27,960 could have done quite a lot of things. Of course, I still recommend putting all the money earned back into the portfolio for compounded gains. That’s how millions are made.

If you review the risk of the portfolio, you will be able to find that the risk taken on by ERM students is actually quite low for a Singapore stock portfolio :

The beta of the portfolio is only 0.42 which means that when the market were to fluctuate by 1%, this portfolio would only move by 0.42%. On a worst month that occurs out of 100 months, the expected loss would only be 5.56%.

It is also rewarding to hold onto portfolio over time. Current yield of the portfolio is 5.9%. Leveraged yield is therefore around (5.9% x 2 – 3.5%) or 8.3% of injected capital which is not too bad. The fact that this is powered by 43 stock counters mean that you can be getting paid multiple times a year – in 2020, the portfolio is expected to pay dividends 624 times across all 10 portfolios or 62.4 times on average !

The portfolio also experienced a maximum drawdown less than half that of the STI ETF in 2019.

The best way to appreciate the defensive features of the Early Retirement Masterclass portfolio would be  to review the portfolio characteristics visually. The red line shows the portfolio performance and the orange line shows the performance of the STI ETF. Note that the portfolio can maintain an sideways trajectory while the STI ETF is experiencing a downwards trend.

Porfolio value marked in blue

In summary, for 2019, my leveraged returns for the student built portfolios remain at 27.96%. This will compound further in the future exponentially for my students assuming they do not take their gains out for a holiday to an exotic destination.

In a future article, we will dive into the best and worst investments made in 2019. If you wish to register for a seat to the preview of the Early Retirement Masterclass, you may do so here.

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