The Secrets Of A Great Portfolio

We sometimes forget just how remarkable Singapore’s growth over the last half century has been. We tend to take a lot for granted, especially when things are going well.

But have you ever wondered how a tiny, newly-independent country in 1965 has managed to grow into one of the most outstanding financial centres of the world?

Look at the numbers

You only have to look at the raw numbers to appreciate just how extraordinary the achievement has been.

In 1965, Singapore’s economy was worth around US$970m. But 50 years later, the country is worth over US$290b. That is a compound growth rate of 12% a year.

What makes Singapore’s growth even more amazing is that in 1965, Hong Kong’s economy, which stood at US$2.4b, was more than twice the size of our Garden City. But today, Hong Kong’s annual economic output, which stands at US$274b, trails that of Singapore’s.

In other words, Singapore has outpaced Hong Kong’s growth rate by nearly a fifth.

So what went wrong with Hong Kong? Or more relevantly, what did Singapore do to get it so right?

Long-term winners

The answer lies in the Government’s focus on long-term winners.

DBS Group (SGX: D05), for example, was set up by the Singapore government in 1968 to take over the financing activities of the Economic Development Board.

In 2000, it was only valued at S$18.5b, but it has grown to be the largest bank in South East Asia. Today, the bank, which is listed on the Singapore Exchange, is worth around S$50b.

Keppel Corporation (SGX: BN4) was another business that was backed by the Singapore government – this time through Temasek Holdings.

The investment arm of the Singapore government acquired the shipyard in 1968, when Keppel Harbour was taken over from the British Royal Navy. In 1998 the shipbuilder was only worth S$3b. Today it is an industrial conglomerate valued at around S$16b.

From dockyard to conglomerate

Sembcorp Industries (SGX: U96) is another of Singapore’s success stories.

It started life as a British Naval base in 1928. It was converted into a commercial dockyard – Sembawang Corporation – after it was handed over to the Singapore government.

But following a merger with Singapore Technologies Industries in 1998, Sembcorp Industries was created. Since the merger, the conglomerate has nearly quadrupled in size.

The list of government-backed winner goes on and on.

There are a couple of important takeaways for, us, investors. Firstly, wealth creation takes time. There are very few get-rich-quick schemes that work, if any.

In the case of Singapore, the early years were spent building the foundations from which the economy could springboard to greater heights later on.

Secondly, it is vital to back winning businesses through both the good times and their tougher moments. It is also important to try to envisage what a company could look like many years into the future.

Time is on your side

As investors we can be a part of Singapore’s wealth creation. But it is important to start by building a portfolio of good companies, today.

Remember that time is on your side when you own shares of superior companies.

You may, for example, think that you have missed out on the first five years of Keppel Corporation’s growth when it returned 130% between 1998 and 2003. But it was still a great stock to own five years after that, too, when it returned 300% between 2003 and 2008.

So, superior companies are always worth owning. And the best time to buy them is when nobody wants them.

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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.