2018 Stock Market Returns of Lump Sum Buy-and-Forget Investment Strategy for The Last Five Years

This is a documentation about an on-going experiment that I started since November 2013.

In November 2013, I opened a separate HLeBroking (Hong Leong Investment Bank Berhad) trading account to do a lump sum (one time) investment in Bursa Malaysia. I chose buy-and-forget as the strategy for this experiment because it requires the minimal effort to maintain.

The portfolio contains 11 stocks from different industries for diversification purposes.

Among the stocks that I bought are from consumer products (APOLLO, DLADY, MAGNI, NESTLE), trading/services (BTECH, MARCO), properties (HUAYANG, UOADEV), finance (MBSB), industrial products (SKPRES) and REITs (TWRREIT) sectors.

The portfolio is skewed heavily towards companies in consumer products sector. This is the sector that is the most immune to negative market volatility.

The amount I had at the time was RM 35008 and was distributed about equally among all stocks (except BTECH which was bought with the remainder of the available sum).

I bought most of the above stocks during the period between November 2013 and January 2014. And I never touched the account since then.

From the date of the first stock purchase (on 20 November 2013) till now (8 September 2018), it has been roughly 4.8 years (1753 days to be exact).

So how is the performance of the buy-and-forget portfolio?

Below is the snapshot of the account as of 8 September 2018 (you can click on the image to get a closer look):

HLeBroking Trading Account as of 8 September 2018

The current market value of the portfolio is RM 53799.86, an increase of 54.03 % from invested capital of RM 35008.

This translates to roughly 9.36 % CAGR (Compound Annual Growth Rate).

Here is the formula to calculate CAGR:

$r = \sqrt[n]{\frac{F}{P}} - 1$

It is derived from this formula:

$F = P*(1 + r)^{n}$

Where:
$F$ is the current market value,
$P$ is the invested capital,
$r$ is the rate of return or CAGR,
$n$ is the number of years.

Things to take notes

Based on the screenshot above, we can see that some stocks have done poorly (e.g. HUAYANG -70.09 %, MBSB -54.89 %, TWRREIT -37.25 %) while some stocks have done extraordinarily well (e.g.: SKPRES +315.87 %, MAGNI +206.53 %, NESTLE +116.2 %).

This is consistent with the saying that there are ups and downs in the market, which is absolutely normal and expected. We should have the stomach to withstand the price drop of the companies in our portfolio.

However, even with the ups and downs in the market, the portfolio turns out fine with more than 50 % gain till date. This is due to the fact that the downside is limited but the upside is unlimited.

The most a stock can drop is to zero while there is no limit to how much a stock can grow.

The upside has more than covered for the downside which is the case here.

Another way to interpret the result is that there are more value being created in the market than the value being destroyed in the market. Human is a highly creative living being and there is no limit to how much value can be created. This means there is an infinite value waiting to be released in the market.

In a nutshell, stock market is a favourable game to play.

It gets even better because I haven’t taken into account the dividends paid by these stocks.

Dividends received

Here is the table that shows all the dividends received during these 4.8 years.

Dividend from HLeBroking

Date	Company	Code	Type	Payment (RM)
09/01/2015	APOLLO	6432		150
06/01/2016	APOLLO	6432		150
09/01/2017	APOLLO	6432	First and final	180
09/01/2018	APOLLO	6432	First and final	150
23/06/2016	BTECH	0011	Final	6.3
28/09/2016	BTECH	0011	Interim	7.3
23/06/2017	BTECH	0011	Final	8
28/09/2017	BTECH	0011		8
22/06/2018	BTECH	0011	Final	8
20/05/2014	DLADY	3026		110
26/12/2014	DLADY	3026	Interim and special	110
19/05/2015	DLADY	3026	Interim and special	110
18/12/2015	DLADY	3026	Interim and special	110
19/05/2016	DLADY	3026		110
29/12/2016	DLADY	3026	Interim & special	110
21/04/2017	DLADY	3026		110
31/05/2017	DLADY	3026	Special	60
27/12/2017	DLADY	3026		110
25/05/2018	DLADY	3026		110
07/04/2014	HUAYANG	5062		70
15/10/2014	HUAYANG	5062		98
12/03/2015	HUAYANG	5062		70
16/10/2015	HUAYANG	5062		112
21/04/2016	HUAYANG	5062		70
17/04/2017	HUAYANG	5062		37.32
17/10/2017	HUAYANG	5062	Final	37.32
30/04/2014	MAGNI	7087		50
06/11/2014	MAGNI	7087		80
20/04/2015	MAGNI	7087		50
20/11/2015	MAGNI	7087		100
26/01/2016	MAGNI	7087		120
26/04/2016	MAGNI	7087		75
28/10/2016	MAGNI	7087		150
13/01/2017	MAGNI	7087	Second & special	75
12/04/2017	MAGNI	7087	Special and interim	90
27/10/2017	MAGNI	7087	Final and special	157.5
12/01/2018	MAGNI	7087		67.5
12/04/2018	MAGNI	7087	Interim and special	105
28/02/2014	MARCO	3514	Third interim	159.2
15/07/2015	MARCO	3514	First and final	39.8
16/06/2016	MARCO	3514	First & final	139.3
30/06/2017	MARCO	3514	First and final	99.5
13/07/2018	MARCO	3514	First and final	99.5
05/06/2014	MBSB	1171	Final	90
28/05/2015	MBSB	1171	Final and special	216
16/06/2016	MBSB	1171	Final	54
22/06/2017	MBSB	1171	Final	54
03/08/2018	MBSB	1171	Final	90
05/06/2014	NESTLE	4707		175
24/09/2014	NESTLE	4707		60
27/05/2015	NESTLE	4707		175
10/09/2015	NESTLE	4707		65
02/12/2015	NESTLE	4707		65
02/06/2016	NESTLE	4707		130
29/09/2016	NESTLE	4707		70
02/12/2016	NESTLE	4707	Second interim	70
08/06/2017	NESTLE	4707	Final	130
21/09/2017	NESTLE	4707		70
14/12/2017	NESTLE	4707		70
31/05/2018	NESTLE	4707	Final	135
27/10/2014	SKPRES	7155	Final	161.5
26/10/2015	SKPRES	7155	Final	186.2
27/09/2016	SKPRES	7155	Final	332.5
27/10/2017	SKPRES	7155	Final	394.25
28/02/2014	TWRREIT	5111		70.73
27/08/2014	TWRREIT	5111		48.26
27/02/2015	TWRREIT	5111		40.36
28/08/2015	TWRREIT	5111		40.32
29/02/2016	TWRREIT	5111	Final	47.28
14/09/2016	TWRREIT	5111	Interim	40.32
28/02/2017	TWRREIT	5111		47.1
06/09/2017	TWRREIT	5111		40.32
28/02/2018	TWRREIT	5111		35.39
30/08/2018	TWRREIT	5111		26.46
17/07/2014	UOADEV	5200		195
14/07/2015	UOADEV	5200		195
15/07/2016	UOADEV	5200		225
14/07/2017	UOADEV	5200	First and final	225
23/07/2018	UOADEV	5200	First and final	225

Dividend received between 20 November 2013 and 8 September 2018

In total, I received RM 8164.53 in dividends from 79 payments throughout this period.

The dividends constitute about 23.32 % (8164.53/35008) of the invested capital. This means about 23.32 % of my capital has been returned to me during this period.

Dividends can further reduce the downside of stock investment since I will never lose all my invested capital.

The average dividend yield is about 4.86 % (8164.53/4.8/35008).

This means the investment is generating an average of RM 141.74 of dividend per month (8164.53/4.8/12).

Taking into account the dividends, the CAGR becomes 12.62 %, a very satisfactory return for me given the minimal effort from me.

Using the rule of 72, the capital will double in about 5.7 years (72/12.62). This is less than a year from now (5.7 – 4.8 = 0.9 year) where my portfolio would have a market value of RM 2 * 35008 (including dividends). However, this is not guaranteed. There is always uncertainty in the market.

Final thoughts

In order to run this experiment, I need to have money that I don’t need. Money, the less you need it now, the more you will have it later.

Let the good companies work for you. Let your money works for you.

Capitalism works. Human is inherently motivated to create value. It is worth to invest in the market.

Finally, ignore day-to-day market price fluctuation since it is not meaningful. Let good companies take care of themselves.

Disclaimer: Don’t follow blindly the portfolio above. Understand what you buy to reduce your risk.

Random Thoughts

Small step, big discovery.