Couple of weeks ago, I was interviewed by CNA Money Mind, sharing my advice with 20-year old Eugene Low, on how to hit his $1,000,000 goal by 33 years old as a Singapore Investor. I also shared this with my LinkedIn community too.
Eugene has a starting capital of $50,000 and 13 years timeline to reach his target.
First things first… is this goal achievable?
Btw, you can watch the full interview here:
Hitting million dollars solely from a capital of $50,000 means he needs to compound at least 26% annual returns on his stock portfolio over the next 13 years.
Based on Eugene’s capital and time horizon, it’s a bold goal. But it’s not impossible.
I’ll explain.
You see, there are super-investors who have consistently achieved such returns over the same period, or even longer — Peter Lynch, Joel Greenblatt and even Warren Buffett.
However, we also need to know investing for maximum returns leaves little room for error (and stressful).
Source: https://www.businessinsider.com/ranked-the-greatest-investors-of-all-time-2014-7
My take? As a Singapore investor, there are actually 3 ways he can hit his million dollar goal, without trying to go for maximum returns.
Let’s go…
1. Diversify: Look toward US dividend stocks
As a Singapore investor, we can look toward US stocks to achieve higher returns.
In fact, returns over the long term have proven that it’s possible to achieve consistent, high returns over the long term.
You can also check out some of my top Singapore dividend stocks to buy here.
Credit: As of 12/31/23. Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Data Sources: Ned Davis Research and Hartford Funds, 1/24
What’s more, there’s a wider range of sectors, companies to pick in order to meet your goal.
There are great businesses, with a durable competitive advantage that have outperformed the stock market over the last 15 years.
This gives the Singapore investor plenty of opportunities to grow their portfolios.
2. Save aggressively as a Singapore Investor
Next, it’s to take advantage of the power of savings.
Assuming earning a median monthly income of $5,000, Eugene could save at least half of his salary each month.
Then put it into the stock market to accelerate the compounding effect on his portfolio.
A $50,000 capital with an annual contribution of $24,000, invested with a 2-3% dividend yield can not only lower his rate of return — lifting a huge pressure off to outperform the market — this also reduces the time required to reach his goal.
What’s more, by actively contributing more money also allows more room for error — such as buying into the wrong stocks.
When I started my investing journey, my wife and myself lived in a modest 4-room HDB flat, didn’t own a car and didn’t spend extravagantly. We do this to save — aggressively. Unlike many of our peers who’d rushed to buy cars and upgrade to condos, my biggest spending is on books.
I’d say savings allowed us to pay down our debt, live comfortably and build a sustainable investment portfolio.
3. Pick solid dividend growers
Ok, so I didn’t manage to share this on CNA, but I found picking solid dividend growers a better way to invest. Why?
I know it sounds cliché, but when you focus all your energy on learning how to identify great businesses that can compound your wealth through capital gains + dividends, it’s way more efficient to hit your goals.
Think about a business like Broadcom. The tech giant makes semiconductor devices, networking equipment and chips.
For example, the Apple Airport Wi-Fi card uses a Broadcom chip. It was founded 63 years ago and made close to $36 billion in revenues last year.
What’s interesting is this: ten years ago, Broadcom wasn’t popular, or hyped up. Heck, no one really wanted to touch chipmakers because they were “boring”.
Shares traded $7.88 per share in 2014, and its yield was 1.1%. This assumes dividends paid was $0.09 per share in 2013.
In 2019, Broadcom paid $1.12 per share of dividends, which gave it a 14% yield ($1.12 divided by $7.88) on the initial cost.
In 2020, Broadcom’s dividends grew to 17%, and later on in 2023 the tech giant paid a 24% yield on a $7.88 per share price.
Note this: even after a 30% withholding tax on dividends, Broadcom’s yield is still a solid double-digit.
Over the last 15 years, Broadcom has paid growing dividends.
Credit: seekingalpha.com
What’s interesting is its dividends grew from 1% to 17% yield. In just less than 10 years, its yield has hit a high double-digit yield, which is impressive.
I know, this looks like a 20/20 hindsight. But the idea here is to accumulate these dividend growers that not only compound its capital gains, but along the way you grow your dividends.
This creates what I call a “double compounding” effect.
Like I’ve mentioned in my How to Safely, Supercharge Your First $100k With Monster Dividends webinar earlier this month, Broadcom’s strong free cash flow allows it to gush dividends year after year.
Credit: tikr.com
The thing is, I want to pick dividend growers to have a double compounding: share price growth + reinvesting dividends and dividend growth (see below).
The big difference from investing solely in growth stocks?
You’ve started accumulating dividend income on top of growing your capital base.
Meanwhile, you compound your portfolio’s value, your dividends grow at the same time.
My final thoughts
These are 3 simple ways a Singapore investor can get started to achieve their goals, whether you want to achieve your first $100k, $500k or $1m is not impossible.
What’s more important is to have a clear plan.
Put it this way… Investing is a marathon, not a sprint.
And what I really admired about Eugene is his mindset is already rooted in sound principles early on. He’s willing to focus on the long-term, rather than the day-to-day noises. He’s cautious about speculative investments like crypto, and he focuses on the long-term rather than the day-to-day market noise.
These are the hallmarks of a thoughtful investor, and it’s clear he’s taken cues from the right mentors, like Warren Buffett and Charlie Munger.
I’ve re-watched the interview and I want to say this – investing is not about achieving massive wealth overnight. Most people fall into this trap.
Instead, it’s about focusing on ourselves, building discipline and consistent effort to achieving our financial goals.
Albert Einstein says compounding is the eighth wonder of the world. This is even more true when it comes to compounding knowledge.
The earlier you start, the more knowledge you accumulate, the better investor and person you become.
What’s your thoughts on achieving your financial goals? Share with me in the comments below!
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
