I know, I know, I mentioned in my first post on gambling my house on the stock market in July last year that I would give you guys an update every 6 months. That was supposed to be in January – but better late than never!

As this is an update post, I’ll try to keep this short and sweet. However, before that, I have to preface that the content of this post is my personal opinion and is not financial advice.

# Now let’s get to it

The short summary of how this “experiment” of cashing out my condo to invest in the stock market is that it’s doing extremely well. For now.

That’s basically the gist of it! Let’s take a look at the numbers, shall we?

## The Cash-out Loan

From the cash out loan perspective, here’s how much I took out in February of 2021 at the interest rate of about 1.05% p.a.:

S$180,000

Here are the additional fees that I needed to pay to take out this cash-out loan:

Lawyer Fee | Valuation Fee |

S$1,200 | S$321 |

So far, up until 5th February of 2022, I’ve made a total of 11 monthly instalments with a total repayment amount of:

S$5,660.54

Which is an average of S$505 per month.

From this, this is how much that’s gone to interest:

S$1,613.75

This means the amount that has gone to paying back the principle amount is:

S$3,834.15

So after 11 months, the remaining loan amount is:

S$176,165.85

So far this looks like a pretty standard cash-out refinancing cashflow. What about the investment side of things?

## Investment Performance

In February 2021, here were the investments that were purchased with the cash that was taken out:

Investment | Unit Price | Quantity | Total |

IWDA | USD 76.77 | 343 | S$35,045.58 |

IWDA | USD 76.25 | 1030 | S$104,211.55 |

AAPL | USD 129.75 | 87 | S$15,012.70 |

QQQ | USD 316.70 | 61 | S$25,588.14 |

Total | S$179,857.97 |

So how has these holdings perform after 11 months?

Here are the current snapshot as of 5th February 2022:

Investment | Unit Price | Quantity | Total |

IWDA | USD 84.41 | 1373 | S$155,964.44 |

AAPL | USD | 87 | S$20,183.31 |

QQQ | USD | 61 | S$29,389.09 |

Total | S$205,536.85 |

So in terms of the investments alone, I am currently up a total of:

S$25,678.88

Or slightly over 14% gains after 11 months. Not bad if I do say so myself – actually in the grand scheme of things, it’s really good.

However, how much is this in terms of annual rate of return?

## Calculating the XIRR

The best way to assess how well an investment performs is to compare apple to apple by determining the annual rate of return using the XIRR formula. This will give us the annualized rate with which we can then compare with other forms of investments.

In order to calculate the XIRR, I would have to take all of the cashflow with regards to this experiment into account:

- The initial loan that is invested
- The fees paid
- The mortgage repayment
- The interest charges on the loan

And finally the final cashflow is to assume that I sell all my investments today and close out the loan today – how much money would I get back.

That final amount would be the total portfolio value + the remaining equity of the loan, which in this case is:

S$205,536.85 + S$3,834.15 = S$209,371

After taking all of the above into account, the XIRR calculation returns:

14.75% p.a.

Now we all know what happened to the market since the start of 2022, this is an amazing result given the circumstances. If we had taken the measurement at the start of 2022, the XIRR was higher than 19% p.a.

Impressive.

Here’s the chart of the investment value over the last 11 months:

# Conclusion

So far, this has been a great decision. I still own my condo (I didn’t have to sell it to get the money out) so if the condo continues to appreciate in value, I can still capture that gain.

At the same time, the equity of the house is not sitting idle in this low-interest environment and is put to work. Of course, this only makes sense since the loan interest rate is so low. If the interest rate is anything higher than 2.5 – 3.5% this would be a lot riskier.

It would be interesting to see how this experiment does over multiple years.

Given that the U.S. Fed is going to be increasing rates soon (probably 4+ times this year) it’s going to be interesting to see how this will impact the long-term returns of this experiment going into the near future. While this will reduce overall returns, I don’t think the rates will increase to a degree that this becomes unprofitable – so I think this is still pretty safe.

We’ll see.

I’ll keep reporting back and share how this experiment is progressing. My theory is that as long as I have the ability to service this loan and stay invested for 20-30 years, it’s very unlikely that this investment would have negative returns… at least that’s the theory anyway.

As a result of this experience, I am considering additional ways in which I can access lower interest loans to leverage for accelerated investment returns. I’ll report back if I decide to go ahead with something new and I’ll be breaking down my decision here as always.

Until next time!

FPL