It’s probably a misconception that investment trainers make a lot of money. At least I don’t.
The pandemic dampened our revenue by more than two-thirds from my peak in 2019. Unlike most, I don’t get paid on a monthly basis, my latest paycheck was $20,083.83, but it was a culmination of three months’ worth of work.
If you spread my revenue over three months, I earn less than most professionals in my age bracket. A monthly paycheck of about $6,600 is less than a fresh Computer Science Graduate from NUS who can land a job in banking or a large MNC Tech company.
Even so, some may argue that my lifestyle is still good as I have complete control over my time and can wake up anytime on a weekday.
$10,000 to be invested in student-built portfolios
This is a unique selling proposition of my ERM program that I don’t expect my competitors to match.
I’ll teach and equip my students to pick dividend stocks during our actual class. They’ll get their hands dirty and design an actual portfolio that can be invested in, based on current live prices. I’ll then invest at least $10,000 into that portfolio.
For my latest batch (Batch 20), a $10,000 portfolio was leveraged to about $16,000 and invested in 16 counters. The portfolios have been sufficiently profitable in the past that I forward to doing this after receiving my fees. Batch 20 built a portfolio that yields approximately 5.81%, which can be leveraged to about 8.2% on Interactive Brokers.
Doing this allows me to keep my personal promises to students:
- They will graduate with applicable skills – they can immediately invest in the portfolio that was designed. There is no need for an additional ‘advanced’ course.
- They will become independent, confident investors who are able to pick stocks and design a dividend portfolio.
- They will have direct support should stock turn bad, such as the recent case of Eagle Hospitality Trust. I provide support and updates of the newest portfolios to my graduates.
The idea is that a trainer cannot guarantee good returns on the knowledge shared. But the conflict of interest can be reduced if the program is designed such that the trainer suffers from any resultant bad investment decisions of his students.
I designed my program to give me skin in the game.
After 20 batches, does my students’ portfolio actually make money?
The returns of all the portfolios built by my students since inception have a time-weighted return of 18.38%, unleveraged. My portfolio tends to be leveraged by x2.
A similar amount invested in the STI ETF would only produce 7.24% over the same timeframe.
The overall internal rate of return was 6.05%, even after accounting for ravages of the pandemic crash in 2020. Estimated leveraged returns would be in the region of 9% p.a.
In essence, stocks selected by my students have produced double the returns of the STI ETF so far.
What happens to the remaining $10,083.83 from my paycheck?
A common challenge I get at my public seminars is “If you are so rich, why do you work as a trainer?”
In these situations, my short answer to the question is that financial independence does not make a person love money less.
For a clearer picture, here’s how I spend the remaining sum:
- $3,000 to the missus for her hardship
From my personal investment income, I give my wife a monthly sum to support household expenses. That is barely enough for her and my two kids. She has to function as a single parent while I conduct my class from my mum’s home. I have an exhibitionist 6-year-old son who likes to dance in the background when I’m on a Zoom call, which can distract my students.
So, after every class, I wire $3,000 to her. This amount will expand and contract along with my revenues.
- 37% for CPF Voluntary Contribution
This component is probably the most controversial.
For this year, I’m experimenting with the CPF Voluntary contribution. Sole proprietors can devote 37% of revenues to the CPF to be distributed across the Ordinary, Special and Medisave accounts.
These distributions are tax-deductible, and I will likely see some of it when I hit 55 in about eight years.
| Age | Ordinary Account Allocation (2.5%) | Special Account Allocation (4%) | Medisave Account (4%) | Total contribution | Blended Interest Rate |
| < 35 | 23 | 6 | 8 | 37 | 3.07% |
| 35-45 | 21 | 7 | 9 | 37 | 3.15% |
| 45-50 | 19 | 8 | 10 | 37 | 3.23% |
| 50-55 | 15 | 11.5 | 10.5 | 37 | 3.39% |
| 55-60 | 12 | 3.5 | 10.5 | 26 | 3.32% |
| 60-65 | 3.5 | 2.5 | 10.5 | 16.5 | 3.68% |
| > 65 | 1 | 1 | 10.5 | 12.5 | 3.88% |
This component is punishingly significant at $7,430.71. (37% off my total paycheck)
I’m likely to fall into a modest tax bracket of just 7% this year, so the tax savings will not be high. But what is significant is, this is equivalent to buying a tax-advantaged endowment that returns 3.22% over eight years.
And with setting aside CPF money, my trainer fees are gone!
In fact, a part of my investment income needs to be put aside to ensure that I don’t miss out on the 37% allocation. By doing this experiment in 2021, I finally realise how hard it is for a sole proprietor to set aside money in their CPF.
Even with this paycheck, a lot of expenses for Q3 2021 have yet to be resolved.
My CPF-OA allocation is used to fix my home mortgage partially, and I still need to find a few thousands of dollars to pay off my mortgage until my next paycheck.
Summary
A reader of this article can reason that a lot of this suffering is optional because I chose to invest in my students’ portfolios and volunteer a complete 37% into my CPF account.
I will finish up my experiment in 2021 and review it to see whether I can sustain the maximum CPF Voluntary Contribution.
With great investment income, comes great personal responsibility. Thus far, stocks selected by my students have produced double the returns of the STI ETF.
P.S. I train aspiring dividend investors who want to retire early as I did, you can join me here for a taster of how my income investing strategy works.
