May 17, 2014

Cory Diary : Investment in STI Index



Year
1988 1989 2013
Annual Capital Injected
$6,000 $6,300 $20,318
Years Invested till 2013 ended
26 25 1
Capital Value
$20,269 $17,339 $18,714
XIRR
3.19%


Today my mind Experiment is Simple. I do a capital injection annually into STI Index starting from year 1988. Injected amount grows at 5% annually.

In Year 1988, i injected 6K which grew to $20,269 after 26 years. In start of year 2013, i injected $20,318 which register a loss to $18,714 within the year. When i total up all my investments, the Compound return is 3.19% over 26 years.

This implied for $100,000 investment at 3.19% compounded will arrive a figure of $226,244. This return excludes Dividend. If i include 3.5% Annual dividends, a potential figure of $538,538. 

This exercise tell myself that to invest in STI Index, Dollar Cost Averaging investment is critical imo. The logic is pretty simple. I got more shares at lower STI. Fewer shares at higher STI.

When STI moves up, more shares benefit. When STI moves down, less shares impacted. Furthermore Stocks will grow with inflation as there is business behind, which mean STI is biased towards higher long term. If all this deductions hold true, it seems to be a viable plan.

Thoughts ?

Cory
17th May 2014

2 comments:

  1. Hi Cory,
    The STI ETF RSP definitely has a place in everyone's investment portfolio. It'll eliminate the risk of timing the market, and is very suitable for people with a long term investment time horizon.

    It's a pity that RSPs provided by POSB and OCBC have, in my opinion, quite high a sales charge of 1%. Hopefully other financial firms like Fundsupermart can come up with a RSP with lower sales charge of maybe 0.5% as it doesn't require much work on their side to justify the charge.

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  2. Hi James, the sales charge is interesting if we take them into consideration. thanks for highlighting it. Maybe we can try to give more weight during market trough to further compensate. Yes, there is element of judgement involves.

    Cory

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