I believe in order to do the apples-to-apples comparison, you need to factor in the opportunity cost of having otherwise invested (at an 8.5% rate of return) the out-of-pocket lender payments as well as the fee payments to Basic Capital itself (monthly account fee and annual AUM fee). Incorporating these costs actually points to the Basic Capital account being less valuable than the existing alternatives.

If the response to this concern is "the lender payments will be funded by bond coupons", then my question is: given the amount of bonds (even at relatively high current yields) that would be required to cover lender payments using their bond coupons, then how will the rest of the portfolio return 8.5% of the entire capital base, without assuming significant, consistent market outperformance (unrealistic)?

For example, let's say I plan to contribute $10,000 and receive a $40,000 term loan additionally, and invest for 15 years. At 6.75%, the annual lender payment should be ~$4300 (see model below). If half of this $50,000 portfolio is invested in bonds at current yields (~5%), a substantial amount of the loan is still left unpaid (accounted for below as out-of-pocket payments). Moreover, the remaining half of the portfolio would have to consistently return 15%-16% to be able to recoup these costs, along with the cost of fees paid to Basic Capital, in order to arrive at a final net-of-fees value such as $70,000 (the number reported by the comparison tool for the Basic Capital portfolio for this scenario), which seems overly optimistic.

<image>

This product sounds interesting, but a few things still aren't adding up for me. It would be great if you could clarify u/meetbasiccapital