Two Ways To Make Your First $1 Million

singapore currencyThey say that making your first million dollars can be the hardest thing to do in investing. They also say that after you make that first breakthrough, the second million is a lot easier because money starts to make more money.

I don’t know exactly who “these people” are but I do know that that in days gone by, S$1 million could mean a life of luxury yachts, personal jets and private islands. But today, a million is probably the bare minimum that you need for a comfortable retirement.

So how do you reach your first million dollar milestone?

I could be flippant and quote Richard Branson who said the quickest way to be a millionaire is to start off as a billionaire and buy an airline. But I won’t.

Instead I’ll show you how you could have reached a million dollars by investing regularly two shares plucked straight from the Straits Times Index (SGX: STI).

Let’s take a boring old company such as CapitaLand (SGX: C31), whose shares have risen roughly two-and-a-half times since 2003. That may not seem like much. But now factor in the dividend payout over the last ten years and an entirely different picture emerges.

On a dividend-adjusted basis, shares in Singapore’s premier property company have increased 4.2 times in ten years. That equates to an annual return of 15.6% or six times more than you would get from a run-of-the-mill savings account.

And to achieve your million-dollar pot, all you needed to do was invest around $3,500 a month for 10 years in CapitaLand shares.

Now consider an even more unexciting company, Jardine Cycle & Carriage (SGX: C07). Its shares have jumped 8-fold in ten years. However, when dividends are included, the increase is around 11-fold. Put another way, it has delivered a total return of 27% a year over the last 10 years.

To achieve your million-dollar pot this time, all you had to do was invest $1,640 a month, every month, in shares of the car retailer for 10 years.

Often sceptical investors point out to me that if investing was really that easy, then why aren’t more of us stock market millionaires.

The answer is really quite straightforward. Investing is not difficult. The problem, though, is that we often think we know better.

We believe that we are able to second-guess every twist and turn of the market. We believe that somehow, we know when is a good time to bail out of the market and, if that wasn’t hard enough, when to go back in. But what we end up doing is to go in and out of the market at exactly the wrong time and, worse still, miss out on those all-important dividends that contribute to the total return.

Truth is, none of us can time the market. We might like to think we do, but we have no idea what the market is likely to surprise us with next.

What we do know, though, is whether is business is run properly. We can find out if it has strong governance in place. We can also find out if the company is profitable and that it is generating cash

All of these things provide us with useful information about whether a company could be a good long-term investment. It’s what we do here at The Motley Fool – look for great businesses that can reward their shareholders over the long haul.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.