Saturday, November 19, 2022

Letter to Batch 28 of the Early Retirement Masterclass

Dear Students of Batch 28,

It’s been a great honour and privilege to conduct a 5-Day Early Retirement Workshop for you.

On 26th September 2022, I anticipated a nasty market downturn when the Fed started to turn hawkish, so while leveraged student portfolios still had a tiny profit, I told the community to exit all leveraged positions. I liquidated everything in all my margin accounts, hoping to return at a better time. The ERM portfolios will continue after conducting its 28th class of students.  

Batch 28 has its unique challenges.

As interest rates have only risen on March 2022, I’ve made a judgment call to only backtest year to date performance of both STI blue chips and REITs. Furthermore, I also took the liberty to decide that it was high time we took on some more risks and limited our REITs universe to twenty REITs that gave the highest dividend yields. This decision was made even whilst high-yielding REITs underperformed compared to the baseline performance.

The first reason is that as REITs are cheap, thanks to rising interest rates, higher dividends can cushion losses moving forward. The second reason is that if interest rates rise longer, REITs, where landlords struggle with increasing rent, will start behaving like bonds, and REITs with the highest dividend yields will have the lowest “duration”. They will preserve their value better as the overall REITs sector fall further out of favour.

Also, as the class size is small, each team had to review many counters before lunch.

The final result is possibly the highest-yielding portfolio we’ve ever built as a programme, with an average yield of 6.88%. I look forward to investing in this portfolio with my SRS funds. Folks anticipating a return to a leveraged portfolio will have to wait a while longer as margin rates remain relatively high.

Lastly, I hope that Batch 28 will participate actively in the FB group. Sometime in Q4 2022, we should meet for an online community webinar.


Hope to see you then!


Christopher Ng Wai Chung

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