Turning Pennies Into Millions

Picture this: Imagine discovering, one day, that a penny, which has been sitting in your top drawer, is now worth over $1 million. It is the kind of stuff that we can only dream about.

But according to Reuters, a rare US one-cent piece was recently sold at auction for US$2.6m. Actually it was sold for US$2,585,000. But what’s US$15,000 when we are talking about a humble coin that went on to fetch a very handsome sum.

A big splash

The “Birch Cent” was reportedly sold to a Beverly Hills rare-coin dealer, who evidently knew what he was doing. The very next day he splashed out another US$2.2m for the Wright quarter, which is American’s first 25-cent piece.

Many of us, it has to be said, dream of turning pennies into millions. Or to put it bluntly, many of us dream of speculating in penny stocks that could make us a fortune, overnight.

The dream has been known to happen. But more often than not, penny-dabbling can turn into a nightmare. Nevertheless many believe that it could still be worth a try.

A better strategy, however, might be to look for solid companies that could deliver consistent return over the long term.

In days gone by, buying shares in those solid companies was a pipedream, for many of us. When board lots in Singapore were 1,000 shares, many of the companies that we would have liked to buy were, unfortunately, beyond our budgets.

So, instead of looking for shares that were a good fit for our portfolio we were forced to look for shares that could fit our pockets.

But all that has changed. As from 19 January, the impossible has now become a reality.

Fit for purpose

Warren Buffett once said: “It is far better to buy a wonderful company at a fair price rather than a fair company at a wonderful price.”

Those words, unfortunately, rang a little hollow when wonderful companies at fair prices were only available to investors with tens of thousands of dollars to invest at a time.

But those wonderful companies are now within reach.

Banks such as Oversea-Chinese Banking Corporation (SGX: O39), grocers such as Dairy Farm (SGX: D01), conglomerates such as Jardine Cycle & Carriage (SGX: C07) and developers such as City Developments (SGX: C09) were once the preserve of the rich. But those companies could now take pride of place in our portfolios, if we want.

The cut in board lot size has made that possible.

But the reduction in lot size means more than just being able to buy and sell smaller packets of shares. It means greater liquidity and greater price-transparency for the Singapore market. It also means that, at long last, wider Singapore share ownership has become a reality.

But more importantly, it means that our portfolios can finally be more balanced.

With board lot sizes cut to 100 shares, we can now think carefully about building portfolios fit for purpose rather than, perhaps, fit only for speculation.

Investing should never be about speculating. It should be about building a portfolio of companies that could improve our wealth by increasing its value over time. Mine does. Does yours?

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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.