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How to Turn $5,000 into $20 Million

We’ve seen how New York University Professor Richard Sylla had built up a sizeable retirement kitty from investing in American stocks for decades; we’ve also seen how Warren Buffett share how a US$40 investment in Coca-Cola in 1919 would be worth almost US$11m today.

Now, meet Anne Scheiber, a normal American lady who turned a U$5,000 investment account in 1944 into US$20m by the time she passed away in 1995. She didn’t do it through furious trading or ultra-complicated financial theories; she did it through the simple act of buying and holding shares of great companies.

In a 1996 CNN article that chronicled Scheiber’s frankly legendary-esque story, it was revealed that she “almost never sold anything” and once bought shares in a company called Schering-Plough in the 50’s for US$10,000. That stake eventually grew to around US$3.8m (a stunning 38,000% gain!) at the time the article was published.

Time and again, we’ve seen great examples of investors who’ve built tremendous wealth through patient investing.

While the CNN article contained some great lessons and tips picked up from Scheiber’s investing acumen, what really struck me was something simpler but no less important: Scheiber was a retail investor, but her experienced closely mirrored that of the professional investor Shelby Davis, who turned a US$50,000 fortune in 1947 into US$900m in 1994 through the same simple act of investing for the long haul.

The great inventor Alexander Graham Bell has a great quote: “Observe! Remember! Compare!” For almost anything in life, those three words are wise to heed. It’s really about observing what goes on around us, remembering those observations, and then comparing them against each other to see what works.

In investing, it’s not by chance that great money managers like Warren Buffett, Shelby Davis, Philip Fisher and Peter Lynch all champion the need for patience; it’s also not by chance that you see how individual investors like Sylla and Scheiber have managed to build up tremendous wealth by patiently investing in shares for the long haul. The thing is, time in the market is an investor’s greatest ally.

And, it’s not just an American thing where investing for the long haul works in an investor’s favour. In our local markets, we’ve more than our fair share of companies that have gone on to achieve multi-bagger returns on the basis of time alone.

Think of the big boys like Keppel Corporation (SGX: BN4), Jardine Cycle & Carriage (SGX: C07), and United Overseas Bank (SGX: U11).

Company

Price: 1 Jan 1992*

Price: Today

% Change

Keppel Corp

S$1.11

S$11

891%

Jardine C&C

S$2.62

S$39.03

1,391%

UOB

S$2.04

S$20.36

900%

*Prices on 1 Jan 1992 are adjusted for dividends, stock-splits, rights offerings, and spin offs

Source: S&P Capital IQ

These shares have delivered huge multi-bagger returns over the past 22 years since the start of 1992. And in the interim, let’s not forget that Singapore had to endure the Asian Financial Crisis, the Dotcom Bubble, the SARS Outbreak, and the Great Financial Crisis, just to mention a few examples of trying times.

But, these businesses pulled through, achieved huge earnings growth in the process, and saw their share prices grow along as a result.

Company

Earnings: 1 Jan 1992

Earnings: Today

% Change

Keppel Corp

S$161m

S$1.78b

1,008%

Jardine C&C

US$70.5m

US$828m

1,074%

UOB

S$262m

S$2.93b

1,020%

Source: S&P Capital IQ

And the thing is, it’s not just them. Singapore’s stock market as a whole, represented by the Straits Times Index  (SGX: ^STI), has also grown by 110% since the start of 1992 as our country – and by extension, the companies and businesses here – slowly grew wealthier with each passing year.

It’s tempting to think of how much more money can be made by trying to flit in-and-out of the markets nimbly. But, the odds are stacked against us being able to do that as it’s likely that the more we trade, the more we lose. Instead, to build life-changing wealth like what Scheiber did, our best odds likely lie with the stock market – with the tenacity and patience to stay invested for the long haul as two indispensable qualities that are needed.

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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 writer Chong Ser Jing doesn’t own shares in any companies mentioned.