Do Good Things Really Come To Those Who Wait?

Being patient always easier said than done. Especially in this fast moving, information overload era that we live in, we strive for instant gratification. Unfortunately, the market can only be magical to someone who has the patience to wait. Most investors might not realise how important a little patience is for your portfolio.

The ultimate passive investor

Let us use our very own The Straits Times Index (SGX: ^STI) as an example. If you have invested in it for about a year, you would have gain about 2.6% excluding dividends. If you have invested in it since 5 years ago, you would be sitting on a 26.4% gain excluding the dividends. If we move the scale to 10 years, you have accumulated a gain of 78% excluding dividends, bear in mind reinvesting a growing dividends for 10 years might by itself created a strong returns as well.

Now, let us imagine that a patient investor invested in the STI since 1989, 25 years ago, when the index was at 1099.20 points. Today, he would be enjoying a 200% gain even if he spent all the dividend he received for the past 25 years. That is an average of 4.5% return every year excluding the strong cash flow from the dividends. A 4.5% return a year might not sound like much, but give it time and be patient, and the power of compounding will work in your favour. Before you know it, your wealth has snowballed.

Sadly, some investors in the market are aware of this but unable to practice it. With the constant barrage of new information daily, one is easily tempted to act upon the information, and cash in instead of waiting for time to work its magic. That is why investors need to constantly remind ourselves, the basic of investing, to let time do its work.

We at Motley Fool Singapore have prepared a report titled What Every New Singapore Investor Needs To KnowIt is a quick five to 10 minutes read on what’s really important about the share market and is a great guide for both new and experienced investors alike regarding the basics of the market. For the experienced investor, it serves as a good reminder on what is important in investing.

Foolish Summary

The market can be a volatile and exciting place. Traders that focus on second-to-second trades fill the market. And yet, more often than not, it is the investors that treats the market as a boring and uneventful place that have reaped the best rewards.

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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 contributor Stanley Lim does not own any companies mentioned above