Getting Started 1

“The main purpose of the stock market is to make fools of as many men as possible.” –Bernard Baruch

Many people would agree, the stock market is for speculators and fools who are looking for an easy means of getting rich quick. More experienced investors believe the main purpose of the Stock Market is to enrich those who methodically save and invest. The Singapore Exchange allows investors to “exchange” daily quotes between buyers and sellers of businesses, facilitating transfer of ownership (shares) in hundreds of businesses each day. It is ironic that every transaction is driven by one investor believing a share is valuable and worth buying, while the very same share at the very same price is sold by another investor believing the share is over-valued and better investment returns can be found elsewhere. What separates the “savvy” from the “average” in Stock Market Investing is the ability to accurately measure the value of businesses and have the confidence, independence, and patience to wait for that value to be recognized by “The Market”. Without doing a little homework and legwork, without the independence of thought and confidence in yourself to allow you to avoid following the crowd, and without the patience to wait for value to be recognized you will be made a fool trying to predict the daily price swings of the Market.

Why Invest in
Stocks?
The Power of Compounding Returns!

	Rate of Return 5%	Rate of Return 10%	Rate of Return 20%
Number of Years	Fixed Deposits Bonds	Mature Stock Markets	Carefully Selected Stock Portfolio
1	$105	$110	$120
5	$128	$161	$249
10	$163	$259	$619
15	$208	$418	$1,541
25	$339	$1,083	$9,540

The table above shows how a single investment of $100 will grow at various rates of return. Five percent is what an investor might expect from a fixed deposit, ten percent is a little less than the historical return of mature stock markets, and 20% is what you might expect using with proven investing strategies discussed later. Small changes in your time horizon (starting your investing while your young), and in your returns (picking good stocks) dramatically affects your eventual wealth (spacious private condo with sea & city view, or HDB flat with view of neighbor’s underwear).

Before we focus specifically on stocks… let’s take a step back and look at the investment process in general?