Saturday, 18 September 2021

Blueprint to build your own STI index - Avg 10yr Annualised Return 12.6%

SGX website provides some good information for retail investors, and one of the few articles published in the website was the report on the 10 year annualised return of the local stocks. The 10yr annualised returns of any stock is a good indicator of how the stock had performed over the last 10 years. If you coupled this with the rule 72, this is a very powerful concept.

The S&P500 10 year annualised returns is around 13.6%. What does this mean? This mean that the amount invested in the S&P500 will double every 5.3 years.

I am writing this article so that my kids, in time to come when they are interested in investing, has something to guide them. 

Below is the table that shows the 10yrs annualised returns for each of the local stock,

Do note that the Capital mall is now CICT.

The last column (index composition) is the weightage of your total fund that you will be investing, the ones with the higher annualised returns will have bigger weightage. You can also choose not to have any weightage at all.

Should you be buying all these now. Of course NOT. You need to value each of the stocks, and buy only when their price drop into the discounted value zone. One of the quick test is using the 5 years avg dividend. At the current price, there are few stocks in the discounted territory.

The avg return from this DIY index is 12.6%. What does this mean?

This means that every 6 years, your invested amount becomes double. Apart from buy S&P500 ETF, here is another alternative to your investing journey.

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