INVESTOR: How my stocks bought with CPF savings have done (2012)

Sandy Chin, an avid reader of NextInsight, sent us this article to share her ideas and experience of investing. She also hopes to provoke other investors to comment and share their views.

CPF portfolio statement as at end May 2012. Except for GSH, the stocks were bought many years ago - perhaps as far back as 10 years ago.

A YEAR HAS passed since I shared a story on my CPF investment portfolio: INVESTOR: How my stocks bought with CPF savings have done

A year ago, it stood at $89,178 (see screenshot below). Recently, the bank statement said it is $93,830 (see above).

That doesn't include dividends of nearly $4,000 paid by SingTel, ST Engineering and ComfortDelgro.

Inclusive of dividends, my gain was 9.7% over the past year. The Straits Times Index was down about 12%, so my small portfolio outperformed it by about 22% percentage points!

Hey, not bad, I thought. I have identified two key boosters:

> Dividends. Never underestimate the power of dividends in investment returns. Investors know this and will gladly chase stocks for their yields. Bosses of S-chips can only do their stock prices a favour if they declare dividends.

Otherwise, people won't be investing in them, since capital gains may be elusive because of the economic slowdown.

> A stock called GSH. This one died on me for several years. Now, it is up and about because of a great effort by management and shareholder Sam Goi to revive it. Thank you!

Lesson: Sometimes we just get lucky -- a business does turn around.

In the first place, I was unlucky though. The stock crashed after the former CEO of GSH (used to be known as JEL Corp) was caught for being part of a scheme that cooked the books, and he went to jail for that.

CPF portfolio statement as at end-June 2011

thumbs-up I have held these stocks for many years - exactly how many I cannot be sure. Let's say it's been 10 years on average, though one of them, GSH, was just a couple of years.

They were high-growth stocks once, but I doubt they continue to be so. They are now dividend plays.

Assuming a $4,000 payout every year, the yield is 8% (ie, 4K divided by 49.8K of capital), which is enough reason for me to just leave a good thing alone.

The total dividends paid to me for the last 3 years amounted to about $12,000.

For conservative calculation, let's take four years (instead of 10 years) of dividends totalling $16,000.

Then my capital gain and dividends can be rounded up to $110,000 (ie, $94,000 + $16,000).

CAGR (compounded annual growth rate) assuming a 10-year period works out to be 8.25%.

This looks a little disappointing but it certainly beats the 2.5% p.a. that the CPF Ordinary Account would have paid if I had left the savings in there.

In truth, a CAGR of 8.25% is enough to lead to a good result. The outperformance of about 6 percentage points a year really can grow your money much faster.

You see, if I had left the $49,808 in the CPF, the value now would be $63,758 only.

It's about $46,242 lower than my current position!

Isn't that a big difference? Please feel free to comment as I would like to learn too from you.

Comments

#7 Gyneth 2012-07-08 10:41

Sandy, in terms of viewing shares as a long term ownership of a business, you would be able to relate to this Fidelity fund manager.

Q: How long does Fidelity usually hold its investments for?

It varies from fund manager to fund manager. We have some fund managers who'll hold stocks for five years or more.

We like to buy and hold. About 30 to 40 years ago, the average holding period of a stock was seven years, but today it's only seven months. The average holding period of Apple's stock is two months.

You can see why, when you've a lot of hedge funds, a lot of day traders. But we don't think that's the best way to invest in equities.

They are a long-duration asset. To really reap the benefits of an equity investment, you have to act as an owner.

#6 Neutral 2012-07-03 04:54

Hey 'loser', you are not wrong but you are taking advantage of hindsight. On top of that you are thinking that investors can switch from one asset class to another so easily. Reality is most can't because they are focused on 1 asset only.

If you made good profit on property investing, congrats!

#5 loser 2012-07-01 20:48

Sandy,
You got calculate how much you would have earned if you had placed a 10% deposit using that $50k ? You could have gotten anything worth $500k property...

discounting the rental... your capital gain now is at least $500k. $50k become $500k (profit excl. capital).

#4 Sandy 2012-06-26 16:16

ST Engg was a good buy a long way back -- I don't have the records but it would have been about 10 years ago. Some of you would probably be in school still!

#3 sci 2012-06-26 13:37

ya, i wonder also when ST Eng had ever been that low price

#2 Brian 2012-06-26 05:20

wow when did that person bought the stocks. ST Engineering at that price I have not seen it in my life

#1 Sammy 2012-06-25 17:39

GSH is your wildcard -- it may make your returns look v pretty in the next 12 months, or it could be just plain vanilla effect. The other stocks like ST Engineering are going to be rock steady whether it rains or doesn't in Spain. Good luck!

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INVESTOR: How my stocks bought with CPF savings have done (2012)

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