Monday, April 06, 2020

Letter to Batch 12 of the Early Retirement Masterclass.

Dear Students of Batch 12,

It’s been a great honour and privilege to be able to conduct a 2-Day Early Retirement Workshop for you.

Batch 12 is all about discontinuities.

On the one hand, we’ve had a break in our normalcy when COVID-19 struck, forcing us to consider back-testing two economic eras to determine the best way forward with our investments. On the other, we had to rapidly pivot ourselves from an ordinary classroom into the webinar format.

The result of a discontinuity is compromise.

We’ve chosen a strategy that worked when the economy was healthy, but we also wanted a plan that will minimise losses when the current condition remains status quo. What we ultimately may miss out on is an alpha strategy that will exploit the return to a bull market when all this over. This alpha strategy will be the subject of a future class that you will no doubt be able to benefit from if you hang around within our community.

Webinars are not my ideal form of instruction as I need to look at facial expressions while I teach to react to facial expressions. Webinars are also not sustainable. As such, we will conclude our training when we are allowed to conduct classes again with a full day practice session when we can work in teams and look at investments in greater detail.

There are some upsides to this crisis. As even bonds have cheapened, we see the return of fixed income instruments in our portfolio. We also see a current yield of over 10% for REITs, if these yields were to halve itself, it would still produce 5% of dividends. It is no wonder that the alumni group is eagerly waiting for this Batch to finalise the portfolio before jumping in with new investments.

The final portfolio is extensive, though, with a total of 18 investments.

I look forward to investing in every counter that has been shortlisted by the class.

As we have already lost 30% from the peak of the markets, patient accumulation without taking on too much risk will allow a beginner to buy the market at rock bottom prices. Sustaining this through this recovery may be how hundreds of new millionaires will be made in about 5-8 years.

But make no mistake – short term there will be loads of pain.

Long term, there will be gains.

I will see you folks at the Facebook group and lab session.

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