In December 2019, we ran the second installation of the Emigration exercise where students would crowdsource information on the web to determine where would be a good place to emigrate to.
Like the previous round, the following key assumptions were made :
- The class will ignore all work permit and VISA requirements of the target country to simplify the exercise.
- The person is single with a $500,000 portfolio in Singapore.
- This person could invest in a portfolio built by the class that yielded 6.35% a year.
- This person will attempt to live in the host country on an unleveraged portfolio, failing which a leveraged portfolio that yielded 9.2% will be constructed.
- If it is too expensive to live in the target country, this person will seek a middle-income job in the target country.
The class will determine whether it is feasible to retire in the target country with a dividend portfolio located in Singapore.
After settling down in the target country, the class will begin to review the macroeconomy and suggest one stock to buy in their local stock market.
For this session, the exercise will cover Malaysia, Indonesia, UK and the US. As there was an extra team, they were allowed to choose a country to review and they promptly chose Taiwan which was a favorite when we conducted this exercise a year ago.
The results were as follows :
| Country | Malaysia – KL | Indonesia – Bali | UK – Brighton | US – California | Taiwan – Taipei |
| Annual Income at 4% (SGD) | $20,000.00 | $20,000.00 | $20,000.00 | $20,000.00 | $20,000.00 |
| Annual Unleveraged Yield (SGD) | $31,750.00 | $31,750.00 | $31,750.00 | $31,750.00 | $31,750.00 |
| Annual x2 leveraged Yield (SGD) | $46,000.00 | $46,000.00 | $46,000.00 | $46,000.00 | $46,000.00 |
| Expat Annual Expenses (SGD) | $15,684.00 | $20,000.00 | $49,000.00 | $55,416.00 | 29400 |
| Median Income ( After taxes ) (SGD) | $9,056.40 | $5,000.00 | $54,000.00 | $86,748.00 | 21000 |
| Retire, retire with leverage, work, or impossible ? | Retire | Retire | Work | Work | Retire without leverage |
| GDP ? Trending Up / Down ? | 4.4% – Down | 5% – Stable | 1% – Down | 2.1% – Up | 2.41% – Stable |
| Unemployment ? Trending Up / Down ? | 3.3% – Stable | 5.3% – Stable | 3.8% – Down | 3.5% – Down | 3.72% – Stable |
| Inflation ? Trending Up / Down ? | 1.1% – Stable | 3% – Stable | 1.5% – Down | 1.8% – Up | 0.59% – Up |
| Market Cycle ? Expansion, Peak, Contraction or Trough? | Contraction – External debt is high. Cannot defend their currency. | Peak-Contraction | Contraction | Peak | Expansion |
| ETF code for this main index in your host country | EWM | EIDO | EWU | SPY | EWT |
| P/E Ratio of the ETF | 18.06 | 15.46 | 14.7 | 18.15 | 15.44 |
| Earnings Yield ( 1 divide by P/E ratio ) | 5.54% | 6.47% | 6.80% | 5.51% | 6.48% |
| 20-year bond yield of target country | 3.78% | 7.12% | 1.18% | 2.36% | 0.80% |
| Is the difference in yield attractive ? Yes/No | 1.76% | -0.65% | 5.62% | 3.15% | 5.68% |
| Correlation with Singapore ( EWS ) | 0.66 | 0.58 | 0.67 | 0.71 | 0.73 |
| First investment in foreign country : Stock name | Maybank Berhad | Bank Rakyat Indonesia | Legal and General | HSBC – bluechip | Taiwan Cement |
| P/E Ratio of selected stock | 11 | 15.15 | 7.7 | 11.26 | 10.23 |
| Projected Yield of selected stock | 6.71% | 3.12% | 7.11% | 5.42% | 7.90% |
| Rationale for the purchase | High yielding flagship that can beat inflation. | Bluechip, popular stable | Insurance counter, stable. Ambitious Growth plan | Large bluechip, but it’s not American. | High free cash flow. Good analyst rating. |
| Votes | 10 | 4 | 1 | 0 | 11 |
Very predictably, it would not be possible to retire in a Western country with $500,000 portfolio invested in the Singapore markets.
Students found that they will need to supplement their dividend income with a middle-income job in their target country:
- Malaysia and Indonesia had such low expat expenses that students can live comfortably within the safe rate of withdrawal of 4%.
- In Taiwan, students found that they could survive on their dividend income and need not resort to leverage to live on their expat expenses.
During the final round of voting, we were able to pit Kuala Lumpur against Taipei to determine which location is the ideal emigration destination as determined by the class.
Result: Taipei narrowly won with one vote with the class really loving the closeness of Taiwanese culture to our own. If you look at the financial metrics that were crowdfunded, Taiwan is also a fairly attractive market for dividends lovers with Taiwan Cement yielding 7.9%. The valuation of the Taiwanese market was also reasonably low at 10.23. If the Kuomintang can pull an upset in the next elections, Taiwanese bulls should be seeing substantial gains.
For readers who are still looking for a place to holiday this December, the above table may be a useful guide to select your next holiday destination.
Editor’s Notes: Singapore enjoys a significant currency advantage versus most of its peers including Malaysia, Thailand, Philippines, etc Cetera. A Singaporean dollar can buy a decent meal in Malaysia. 5 Singaporean dollars can feed you for a whole day.
A Singaporean friend of mine who lives in Johor Bahru lives like a king off of his dividend portfolio while pursuing his dreams – shooting trap.
The drastic, perhaps ugly truth of the world we live in is that there are pockets of inefficiencies in our lives. We might love Singapore for its safety, its food(though I’m sure Malaysians disagree), its medical facilities, its top-notch transport(again, some will disagree), but we also hate the constant rat race to the top.
For most of us, escaping the chains of corporate slavery or ascending the career ladder to a point where the money is better is a priority, and this exercise gives individuals a credible goal to work towards. Don’t forget that when you do actually emigrate, you get to do something crazily valuable – renting your house out in SGD and spending it in Baht or Ringgit.
That friend of mine stays in a beautiful 4 story glass bungalow that cost less than $300,000SGD. What can you do with the rental flow of a 5 room in Malaysia or even Thailand? The sky’s the limit.
For locals who wish to retire early while enjoying similar living luxuries without leaving the country, a $500,000 capital sum leveraged at an equity multiplier of 2 allows you to generate nearly $95,000 in yearly dividends or about $7,916 per month.
If that’s not enough for you to retire on, perhaps you ought to consider spending less money or simply turning that Ringgit and going wild – or simply push all the dividends you get into more dividend stocks and let it compound more. The choice is yours.
If you’d like to find out how we build, test, and devise portfolios for Early Retirement, you can register for a seat here.
