Early Retirement Masterclass Portfolio
The Early Retirement Masterclass (ERM) portfolio is a collection of 36 portfolios invested over the past 6 years by close to 700 alumni over 36 batches of instruction. The portfolios are buy-and-hold, and no rebalancing has taken place, giving us a rare glimpse of how low beta high dividends Singapore stocks have behaved over the years.
This portfolio has a long history of surviving the COVID crisis and the Fed raising interest rates in 2022. It shows the power of dividend portfolios to pay out stubbornly across bad parts of the market cycle.
As interests have risen beginning in 2022 after a nasty bout of COVID-19, the overall performance of the portfolio performance is nothing to shout at. XIRR was only 3.3%, with time-weighted returns of 35.42%. With a capital injection of about $650,000, the portfolio has spun off $137,000 in dividends since course inception. Finally, the portfolio has a low beta of 0.63, so the risk investors take is about 37% before that of the market.
2024 would have been an excellent year for local investors. Still, because inflation remains stubborn in the US, the Fed could not lower interest rates as much as investors would have wanted, so the Singapore markets saw a remarkable movement for banks, and many investors incurred losses via REITs. The ERM portfolio, being 50% allocated into REITs, underperformed the index but was still up about 9% this year. Star performers are small caps like Civmec, and we took a hit when some blue-chip REITs like Mapletree Logistics Trust underperformed.
2025 should be a decent year for the ERM portfolio as the banks’ area is already getting expensive, and yields in Singapore are also increasing as prices get depressed further. Some will ask us how long REIT and business trust investors will be denied. The point is that 2025 will begin with extending the great Singapore Sale for yield plays. Recent batches of students are building starter portfolios with yields over 7% thanks to the introduction of Singapore Depository Receipts like the Bank of China.
All-Weather Portfolio
The All-Weather Portfolio (AWP) is a different beast from ERM. The underlying principles are the same as we continue to optimise high-risk-adjusted returns. Still, we do this using a computer program developed in Python to perform our trades, so while ERM is geared towards fundamental analysis, AWP is firmly in the technical analysis camp as we use trend-following and mean-reversion algorithms to target 8% gains every year with a standard deviation well below 4%.
The AWP portfolio earned about 16% over 16 months, but this was also done with very low risk, perhaps a quarter of what is experienced by folks who buy the broad equity indices.
The first broad component of AWP is a trend-follower that produced an XIRR of 7%. The performance is keyed mainly to whether there are broad trends in the cryptocurrency market backed by US equities.
The second component of AWP, which targets oversold US blue chips, surprisingly did better with an XIRR of 10+%.
The final portfolio snapshot before the 2nd January rebalancing looks like this. Do note that as all of these decisions are dynamically determined by a computer algorithm, please refrain from replicating this portfolio:
2025 should not be too different from 2024, as the algorithms were tuned to ignore market cycles. As I’m satisfied with its steady performance, I will allocate some of the dividends I collect into this portfolio.
Look forward to 2025
There is a lot of excitement over how the investment training will evolve this year. We’ve started making investment analysts by generating highly detailed ChatGPT prompts to create analyst reports that cover companies that are ignored by brokerage research houses, and we have seen some good performance so far. We are also beginning to derive Hong Kong dividends into our CDP accounts as we now have access to deep value plays from China’s malaise.
Even if 2025 is quite the middle of the road, the dividend yields along should provide a fairly good year ahead.
If you’d like to learn how you can build a dividend portfolio that pays you while growing in the current markets, join me at the next live webinar, free.
