Ride Your Way To Greater Wealth

I used to be envious of people who zip through the congested roads of Singapore on their bicycles. But not anymore.

You see, after years of being unable to ride a bike, I have finally learnt how to, thanks to encouragement from those who can.

For the first time ever, I climbed on a proper pushbike on the secluded roads of Pulau Ubin. The one-hour experience cost me just a few dollars – the best few dollars I have ever spent, I reckon.

The adventure was not without its wobbles.

But after several tentative starts and some undignified dismounts, I was merrily pedalling along the tarmac tracks – enjoying the sights of the idyllic island.

Watch and learn

Investing on our own is a bit like riding a bike for the first time. We are, understandably, anxious when we take our first steps. And no one wants to fall off, unceremoniously.

That is why it could help to watch and learn from those who have done it before. It is also important to take things slowly.

Start by identifying why you want to invest for yourself.

In my case, it was because I objected to the exorbitant fees I pay other people to do something that I could do just as well myself.

I also know where I want to be financially by a certain point in time. If I had paid someone to do it for me, it could take considerably longer.

Money for nothing

Consider if we invest S$1,000 a month into an investment that returned 8% a year for 20 years. At the end of two decades, we could amass a nest egg of around S$590,000.

But what if we had paid 2% in annual charges?

The nest egg would still grow, but not as much. The investment pot could be worth just S$464,000.

For some people, paying $6,000 a year in fees might seem reasonable. But not as far as I am concerned. Here’s why.

Look at what could happen if our investment horizon is extended beyond 20 years.

More money for nothing

Consider someone who starts investing at the age of 20. But now, the investing period is for 45 years. In other words, until they reach retirement at 65.

This time, the S$1,000 invested monthly at a return of 8% a year could grow to S$5.3 million. That is a decent retirement pot.

However, if 2% had been deducted in fees, the nest egg could diminish by almost half to S$2.8 million. In other words, it could take the person until the age of 75 to reach a pot of $5.3 million.

The upshot is the earlier we start investing for ourselves, the sooner we could reap the benefits.

Looking for gems

But do annual returns of 8% a year exist?

In the Straits Times Index (SGX: ^STI), total annual returns of more than 8% over the last 20 years have been delivered by the Jardines quartet of Jardine Matheson (SGX: J36), Jardine Strategic (SGX: J37), Jardine C&C (SGX: C07) and Hongkong Land (SGX: H78). Dairy Farm (SGX: D01), which is not part of the benchmark, has returned 17%.

So decent returns do exist. And we here at The Motley Fool Singapore want to help you find them.

Your first step is to want to do it. The second step is to do it. Just like me and my first pushbike ride. Together we can.

A version of this article first appeared in Take Stock Singapore. Click here now for your FREE subscription to Take Stock — Singapore, The Motley Fool’s free investing newsletter.

Written by David Kuo, Take Stock - Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.

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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.