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How To Turn $10,000 Into $50,000

It was not an entirely unexpected encounter. I had made the trip to the National Library, specially.

But it was still very exciting to meet Yip Pin Xiu.

Meeting the gold medallist swimmer was a humbling experience. And seeing Singapore’s para-athletes arriving in a convoy of Ferraris to a specially-organised reception made me realise that anything is possible.

For a contingent of just 12 athletes to win three medals at the Rio Paralympic Games is quite a triumph. So congratulations to Team Singapore.

Size doesn’t matter

Singapore might be a small country. We are only the 30th largest country in the world. But we certainly punch above our weight.

The same goes for our Singapore companies.

We don’t have the likes of Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT) or Intel (Nasdaq: INTC) to bolster our stock market index.

We don’t have the same bragging rights as Hong Kong for floating Chinese companies.

But that doesn’t matter.

Returns count

Over the last decade, a host of Singapore companies have delivered annual total returns in excess of 10%. That is quite an achievement.

Thai Beverage (SGX: Y92), for instance, has delivered an annual total return of 17.7%. Around three quarters of that has come from its share price rise. The rest has come from re-investing its dividends.

Jardine Cycle & Carriage (SGX: C07) has delivered a mighty return too. Its shares have risen around 13%, while dividends account for 4% of the total returns. A $10,000 investment in the conglomerate would have turned into around S$50,000 over 10 years.

Lots of diversity

Other notable performers on the Singapore market include Singapore Telecommunications (SGX: Z74) and SATS (SGX: S58). The two companies could not be more different. But their returns are more than comparable.

Singtel’s annual total return of around 11% has been driven as much by its share-price growth, as it has from re-investing dividends. The same goes for SATS. Both companies have delivered inflation-beating returns.

Same but different

One of many things that link the four companies is their above-average returns on equity over long periods. They are able to generate substantial returns on every shareholder dollar invested the business.

As investors we sometimes forget that investing is a marathon rather than a sprint.

But some of us crave immediate excitement.

Some of us hanker after instant gratification.

Some of us want a share to climb almost as soon as we have bought it.

Unfortunately, the stock market rarely, if ever, works like that. It is time in the market rather than timing the market that counts.

It can take years

It can take months, if not years for a company’s shares to reflect its underlying financial performance. So patience is crucial.

It is also important to look for good companies. These companies can make good use of their assets. These companies can use debt prudently.

These companies exist in Singapore.

We should be on the lookout for these companies. These are the types of companies that we should consider holding for the long term.

Activity versus prosperity

That is one of the best ways to make money from shares.

Jumping in and out of the market may give the impression that we are busy. But frantic activity doesn’t necessarily equate to fantastic prosperity.

Warren Buffett once said: “We don’t get paid for activity – we get paid for being right.

Being right means having more information than the other guy – then analysing it correctly and using what we know rationally.

So think about that the next time you are itching to press the “sell” button.

Spend some time pondering how a company could look in a decade’s time.

  • Will it be bigger than it is today?
  • Will it be more profitable than it is today?
  • Will it distribute more of its income as dividends than today?

If the answer is yes, then consider carefully whether you really want to miss out on that over the next ten years.

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.