Temasek Holdings’s portfolio reached a record-high $193 billion at the end of its last financial year. Its portfolio grew from a previous record of $186 billion in the preceding year, and it grew its net profit from $4.6 billion to $12.7 billion for the year ended March 31. The one-year total shareholder return as of 31 March 2011 is 4.6%.

Is 4.6% Return high or low?

Take a look at Annualized Total Return to Shareholders as below.

• One-year : 4.60%
• Five-year : 7%
• 10-year : 9%
• 20-year : 15%
• since 1974 : 17%

And If you recall, Temasek’s last year return was 42%.

Recently, I met a client who showed me a fund, with excitement like discovering a gem, whose fact sheet stated it had more than 20% annualized return. I just asked him two questions:

• “How long does the fund exist?” — As expected, merely 4 years.
• “What is the maximum drawdown of the fund?” — Again, as expected, 60%!

So is this fund manager better than Temasek Holdings?

While many investors want to get the returns like professionals, it is hard for them to think like professionals.  Now back to the chart below. While the short term returns are pretty volatile, In a longer period, i.e. 20 year, 30 years and even since inception, the returns are very consistent, between 15% to 17%.

If you are able to park $10,000 with Temasek since they started, you will have $3.3 million by just getting an annualized 17% return. so is the one year 4.6% high or low? Do I really care?

Why do you have to focus on the long term return?

Because you have to invest for the rest of your life. If you just want to make a windfall by buying stocks, I think you will be better off by throwing the money into the casino. After all, you can still get a free five-star hotel stay, free food, free holiday, etc. By speculating in the stock market, the person who will enjoy the hotel stay is your stockbroker.

You can download the Full Temasek Review 2011 from this link.