How To Build A Double Digit Portfolio Return
In my previous posting, I mentioned that one of the benefit of having a private bank account is to get cheap loans:
myasiaprivatebank.blogspot.sg/2016/10/how-does-rich-invest-in-financial.html?m=1
It is every investors' dream to generate double digit portfolio return. Many investors have tried various ways to achieve that, including buying small cap stocks, or buying growth stocks using leverage, or trading forex. But all these methodologies are too risky and not sustainable in my view. You can win big today and lose big the next trade.
The easiest way to generate double digit portfolio return is build a REITs or bond portfolio using leverage.
Below is a hypothetical example of a REIT leverage portfolio:
Cost value of the portfolio: SGD3,841,001
Loan value: SGD1,204,350
Loan interest: 1.33%
Capital Outlay (Cost value of portfolio - Loan value): SGD2,636,651
This portfolio has generated dividend yield of SGD281,567 per annum.
Loan interest per annum is SGD16,018.
Hence dividend less interest would be: SGD281,567 - SGD16,018 = SGD265,549 per annum.
Since capital outlay is SGD2,636,651, portfolio yield would be SGD265,549 / SGD2,636,561 = 10.07%.
This is not a perfect portfolio as interest rate is likely to rise next year. We can add Singapore banks into the portfolio when share price is right. Purpose is to hedge interest rate hike.
In this hypothetical portfolio, credit surplus is around SGD989,065. Hence unless the portfolio value drops by SGD989,065 or 25%%, then the portfolio is at risk of margin call.
Even if interest rate rises next few year, the portfolio would still be able to generate high single digit return.
If you manages to consistently generate 10% a year, all you need is 8 years to double your money.
Please note that this is a relatively high risk portfolio (as leverage is involved), but it is a safer and more consistent way to generate double digit return compared to most methodologies used by most investors.
myasiaprivatebank.blogspot.sg/2016/10/how-does-rich-invest-in-financial.html?m=1
It is every investors' dream to generate double digit portfolio return. Many investors have tried various ways to achieve that, including buying small cap stocks, or buying growth stocks using leverage, or trading forex. But all these methodologies are too risky and not sustainable in my view. You can win big today and lose big the next trade.
The easiest way to generate double digit portfolio return is build a REITs or bond portfolio using leverage.
Below is a hypothetical example of a REIT leverage portfolio:
Cost value of the portfolio: SGD3,841,001
Loan value: SGD1,204,350
Loan interest: 1.33%
Capital Outlay (Cost value of portfolio - Loan value): SGD2,636,651
This portfolio has generated dividend yield of SGD281,567 per annum.
Loan interest per annum is SGD16,018.
Hence dividend less interest would be: SGD281,567 - SGD16,018 = SGD265,549 per annum.
Since capital outlay is SGD2,636,651, portfolio yield would be SGD265,549 / SGD2,636,561 = 10.07%.
This is not a perfect portfolio as interest rate is likely to rise next year. We can add Singapore banks into the portfolio when share price is right. Purpose is to hedge interest rate hike.
In this hypothetical portfolio, credit surplus is around SGD989,065. Hence unless the portfolio value drops by SGD989,065 or 25%%, then the portfolio is at risk of margin call.
Even if interest rate rises next few year, the portfolio would still be able to generate high single digit return.
If you manages to consistently generate 10% a year, all you need is 8 years to double your money.
Please note that this is a relatively high risk portfolio (as leverage is involved), but it is a safer and more consistent way to generate double digit return compared to most methodologies used by most investors.
Comments
Post a Comment