Want riches from innovation and growth? Simple; own stocks
You don’t need much beyond patience, discipline – and time
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MUST you be a soothsayer to succeed with stocks? Many think so. Or they think wealth springs only from highly specialised knowledge. Or wealthy connections.
No! It is easier than ever to build a nest egg through stocks – giving yourself a slice of all the innovation and growth not only of Singapore’s economy, but also the whole world’s.
You needn’t know how the world will look 30 years from now. You needn’t dodge stock market drops. Or be a stock-picking guru. You just need patience, discipline – and time.
When I started my career 54 years ago, retail investors faced huge challenges.
Information was sparse; no Internet for up-to-the-minute information on stocks and the firms behind them. Research involved scouring library archives, paging through hard copies and microfiche of news and company reports. Getting data was a heavy lift.
Commissions on US stock trades were typically 2 per cent and fixed until 1975. Fat bid/ask spreads – the gap between buyers’ and sellers’ offering prices – further eroded returns.
Singapore’s market was also far less efficient before 1997’s crisis led to big reforms, such as the end of fixed commissions and ditching of restrictions on foreign investors, which removed frictions and deepened liquidity.
All that has now flipped. Cellphones now harness oceans of information and data I never had back then. Anyone can open online accounts with next to nothing – and trade cheaply with tiny bid/ask spreads. You can even buy slices of shares.
Stink at stock picking? Don’t have the time for research? No problem. You needn’t find the next Amazon, Nvidia or Sea. Exchange-traded funds let you own the broader market cheaply.
Understand what these funds really are: a chance to participate in the innovation, growth and evolution of Singapore and the world’s economies – for dirt-cheap costs.
Owning a broad fund means not needing a crystal ball to pinpoint the next tech goliath or retail powerhouse. You will have a stake in them as capitalism’s progress ceaselessly snowballs.
And it will continue. Consider: Many giant market darlings from decades past are gone or withered away.
Take National Cash Register (NCR), a US firm that started in the late 1800s building cash registers and morphed into America’s fifth-largest computer manufacturer a century later – a titan!
AT&T bought it in 1991 in a then-massive US$7.4 billion deal, or US$18.2 billion in today’s dollars.
Since then? NCR has been spun off, turned upside down and split into pieces. Once among the biggest, now far fallen – and replaced by new stalwarts.
That isn’t an anomaly. In 2024, I detailed the creative destruction driving capitalism’s magic. It keeps churning. Of today’s 20 biggest publicly traded firms worldwide, only four made the top 20 in 2010. Only one was in 1990’s top 20. None were on 1970’s top 20!
Many of those 1970 giants – firms many thought would dominate forever, such as Eastman Kodak, Sears and Xerox – long ago faded into irrelevance.
The case is the same in Singapore. In 2010, Genting was the MSCI Singapore Index’s 10th-largest stock. Last year, it was removed from the index for being too small. Meanwhile, Sea has rocketed to become the index’s fourth-biggest stock. It went public in 2017.
This isn’t a bug; churn amongst the biggest firms is a feature of capitalism. It is growth, innovation and evolution in action. Diversifying in stocks lets you ride it. Gold, Bitcoin? They don’t benefit from capitalism’s growthy magic. Bonds don’t. Private equity, maybe, but it is costly and illiquid.
Owning a broad swathe of stocks – or the whole market – won’t get you rich quick. But it builds real wealth better than most categorical alternatives, if you hold on.
Since 1969, the start of good data being available, Singapore stocks have annualised 9 per cent returns. US stocks, good data for which track to 1925, are slightly better at 10 per cent in US dollars.
That doesn’t mean 9 to 10 per cent year-in, year-out.
Since 1969, Singaporean stock returns have been positive 63 per cent of years – meaning over a third featured declines. US stocks have been negative about a quarter of years since 1925.
But remember that those 9 to 10 per cent returns include all the bad years. Many don’t, trying to dodge short-term downside. Most fail – badly.
Others don’t bother at all, thinking they don’t have enough starting cash to generate difference-making returns. No!
A S$2,400 annual investment of S$200 monthly, compounded at even 8 per cent over 30 years becomes nearly S$300,000. That may pinch you in the short term. But over the longer term, it pays huge dividends – if you stay disciplined and don’t try to in-and-out the market.
The barriers are lower than ever to own a long-term piece of the vibrant, growing global economy. What’s stopping you?
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