Letter to Batch 19 of the Early Retirement Masterclass

Dear Students of Batch 19,

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

Invariably, the challenges faced by every batch of students are human and cannot lend themselves totally to investment analysis. This batch brought up plenty of challenges, such as the following :

• A student realises that if he wishes to upgrade his academic qualifications to climb the career ladder, he would have to consider the opportunity cost of investing in the stock markets.
• Another student is contemplating selling a property to invest in the markets but has to weigh a real possession against intangible investment security.
• And yet another student wants to know whether it is wise to distribute dividends to her teenage children who seem indifferent to the world of finance.

I cannot find a straightforward answer to these challenges, but common sense would suggest that a solution can come in the form of “little bets”. Before making a big move that involves $100,000 in size, it may be wiser to experiment with smaller batches of the capital of size $20,000. It would help if you were comfortable with a $20,000 investment generating income for you before scaling it up to replace a piece of physical property.

Of course, the course continues to throw up fascinating problems that can confound expert investors. The course brought forth two interesting issues :

• The first question concerns whether the Z-Scoring mechanism taught in the program would have been better served by a t-scoring mechanism that is used in PSLE scoring for Singaporean students. As I was unfamiliar with the statistical t-test, I had to google for answers. As it turns out, there is no functional difference in Z-Score and t-score where the sample size is 1.
• We attempted to backtest US blue-chips on Saturday but were unable to do so due to time constraints. I will publish an article on the Dr Wealth blog to explain this exercise within the next two weeks once the DJIA backtest capability becomes integrated into the Pyinvesting.com tool.

Our course continues to evolve as we introduce Regime Analysis into our program. We break the stock price trend into its uptrend and downtrend, as shown in the following diagram. While the program does not use price trends to time the markets, having this form of analysis facilitates the investor to minimise regret when building their portfolios.

A chart on Prime REIT below shows that the coast is clear to buy the REIT and introduce it into our portfolio.

 

I will provide details on how to access the ERM Data Tool on the FB group.

Lastly, I hope that Batch 19 would participate actively in the FB group. We should be able to see each other again in March 2021 when I conduct a community webinar for the community to introduce marketing timing techniques into ERM portfolio creation.

Christopher Ng Wai Chung