This is the second follow-up post on the video DCA monthly with Buying the Dip.
One interesting observation is the weak performance of ES3 over this period of time. In the video, I tried out dollar cost averaging monthly or only buy when ES3 crashed by 20%.
Practising DCA hardly gave any return and even if we include dividend, the internal rate of return is only 3.5%!
Does that mean the Singapore Market is not investible?
Well, the same set of data shows that buying the index during a crash with dividend reinvested provided quite a reasonable return. My personal experience suggested otherwise too as I was able to obtain a good return by picking stocks in the Singapore Market.
In this post, I will share five counters that outperformed ES3 over the past 10 years.
Overview
To simplify the comparison, I will not use DCA, buy the dip or reinvest the dividends. Instead, I will just compare by using the starting price of January 2013, starting price of January 2023 and the total dividends collected over the 10 years.
ES3
As seen from the above chart, ES3 opened at $3.220 in June 2013. Lo and behold, it opened at $3.306 ten years later, a mere 2.7% higher! The consolation comes from dividends which amounted to $1.007 over the ten years.
A lump sum investment in ES3 in January 2013 would provide a total return of 33.9% if it is cashed out in January 2023. That is equivalent to an average compounded annual return of 3.0%. Yes, it would have been better to transfer the invested amount to CPF!
Famous Five
I decided to choose five Singapore counters that are in different sectors to show that the winners do not concentrate within a single industry. The five companies are ParkwayLife REIT (real estate), Raffles Medical Group (medical), The Hour Glass (retail), UOB (finance), and Venture (manufacturing).
The table below summarises their return over the ten years.
Not bad, isn’t it?
Even the lowest return from the five, has a compounded annual average return that is double of that ES3. If one invested $10,000 in each of the above counters in January 2013, that amount will have grown to $131,800 by January 2023.
In another word, $50,000 capital would have compounded on average at 10.2% annually!
You might not be too impressed by the absolute value. 10 years to just earn $81,800? However, time is the key ingredient to the magic of compounding. If the portfolio can continue to grow at the same rate, the amount would balloon to about $350,000 in another 10 years.
Not forgetting that this amount is just from the initial investment. If dividends were reinvested and new money were added annually, then that will be a sizeable accumulated amount in 20 years!
What’s the catch?
This is all in hindsight! Hence, it is easy to see how this can be done.
However, it will not be as easy if one has to go through the above period of time, without knowing the final outcome. Let me show you the charts of the five counters next.
ParkwayLife REIT
I would think that among the five counters, this would be the easiest counter to invest in. Firstly, mentally we would have little expectation of much capital gain since REIT paid out 90% of its earnings. Also, with the exception of the late 2022, the previous price dips were not too difficult to stomach.
Raffles Medical Group
Investing in Raffles Medical early in 2013 was like striking a jackpot, as the price continued to trend upwards. However, how many of us would be able to withstand the sharp drop in 2017 and hold on to the shares till 2023?
The Hour Glass
The Hour Glass is even more interesting. Among the five, it gave the highest return! However, the spike in price only came in 2021, eight years after investing in 2013. How many of us could hold on to the initial investment for eight years and get the return after that?
UOB
Bank is a cyclical stock that is largely dependent on the economy. Again it would not be easy to hold on to the counter during the down cycles.
Venture
Besides the spike in price from mid-2016 to mid-2018, the price of Venture has been pretty flat. Of course, after 2018, the flattish price was higher but how many of us would be able to hold on to it from 2013 to 2018?
In a nutshell
While ES3 over the past 10 years did not provide a good return, there are still individual companies in the Singapore market that would be able to do so. In hindsight, identifying them is easy but to do that without knowing the final outcome will not be easy. This is especially so if the focus is just on the price movement.
Having said that, not easy means it is doable. Focusing on the fundamentals of the business will help us to build a portfolio of good companies. There will be incorrect picks but if we put in due diligence and regularly monitor the business, there should be more winners than losers in the long term.
That will give us good returns in the future, which is highly likely to outperform ES3.