Sunday, February 17, 2019

Letter to Batch 3 of Early Retirement Masterclass Students

<<  Sharing this to readers as it is also a personal update. First time running a course while on pain-killers. >>

Dear Students of Batch 3,

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

This is the first class that I am conducting under a regime of painkillers. I had a toothache a day before and did not want to risk surgical extraction before conducting the lesson. I am grateful that a student introduced his dentist friend to conduct the procedure for me although I am not too sure whether I should just get it over and done with first thing tomorrow morning. This reflects the value of attending a course where students take their personal finance seriously. I hope that you are able to get to know each other better at least for networking purposes.

This course has seen largest number of structural changes since Batch 2. With the use of Mentimeter, the class can achieve consensus by voting on an asset allocation.  We also have enough data points from previous batches to inform everyone of the decisions made by previous batch of students. I hope that incorporating feedback will make each class more “intelligent” and we would be able to build successively better portfolios in the future.

One area that is left resolved is a correction made to the yield of Astrea IV Bonds. We initially calculated it to yield around 4% but revised it later to 2.83%. This is because a student pointed out that I should consider the scenario whereby the bond gets called in 2023 and work out a worst case scenario for the yield (yield to worst).  This might be too elaborate over a 2 day course but I expect to release a blog article on this within the next week.

Finally,  I attached the asset allocation suggested by the class in Annex A. I have also attached our co-created portfolio that yields 6.33% in Annex B of this message. Also included are the results of the equity screening in Annex C. These six stocks can be part of any equity portfolio but may not necessarily attract cheap margin financing.

I look forward to investing $10,000 of my own fees into my margin portfolio with an equity multiplier of 2 into the portfolio in Annex A. You will hear details of my execution sometime before the end of February.

It has been fun teaching you guys and co-creating new leverage portfolios together as  a class ! Now I got to get a good sleep so that I can get my tooth extracted tomorrow !

Christopher Ng Wai Chung


  1. Hi Chris,

    I was at your talk on Valentines day but didn't get a chance to speak to you as my wife wan't feeling well.

    6.33% yield is pretty good in today's market. Is that leveraged? Most of the conservative REITS yield 5.5 to 6% now: eg: SPH Reit, A-reit, Frasers centerpoint trust, Netlink. My impression is that any higher yielding ones have financing or currency risk.

    The main question I have to ask is: how do you deal with the once-in-a-blue moon bear market? You talked about your experiences 2007-09. When I look at charts, the better REITS were down 50-60% during this time. Even with hindsight it would be hard to construct a portfolio that only dropped 30-40% during this time (...maybe Vicom, comfort).

    A young person just starting out could live through a downturn as they are still earning (and adding cheaper stocks) a lot compared to their portfolio size. For an older person, putting everything into high yielding stocks now - where their current salary is a small proportion of their savings - a 50% decline would be devastating psychologically. I don't think anyone human could go through that. And I'd worry about throwing leverage into the mix. What would you suggest for older people?


  2. Hi BlackCat,

    6.33% yield is unleveraged. After leverage you can get over 9% yields.

    I teach a technique called building a Bear Trap to deal with a bear market. You can search my blog for references to it. It's not an ideal solution but it's the best I can think of.