There are many clichéd assumptions in money-obsessed Singapore, particularly regarding investments and markets. Additionally, many of these assumptions have been perpetuated by older Singaporeans to younger ones. Here’s a look at some of these market assumptions and their logical validity.
#1: Property Market Will Go Up Forever
Perhaps the biggest assumption backed by decades of consistent property value growth, many Singaporeans are convinced that property is such a good investment that it has become somewhat of a compulsory rite of passage into adulthood/marriage. Underlying this is the assumption that Singapore’s property market will only see brighter days ahead, and even if values plunge, you will still have a hard asset to rely on.
As evidenced by any other market in history, every market that goes up will eventually come down due to demand/supply factors. Just because property markets have gone up over the past few decades doesn’t mean that this will continue going forward into the future. Instead, factors that would lead to a better understanding of the market long-term could be variables like population growth, housing supply, macroeconomic/monetary conditions and so on.
#2: Market Timing Doesn’t Matter
Following the popularity of value and Buffett-inspired investing, market timing has earned itself a bad name, almost blasphemy in the realm of investments. The assumption is that as long as you pick out a good company at a good price (which is ultimately very subjective), you should always win in the long term.
Yet if one uses measures like P/E ratios to determine good entry points, or watches how long-term professional investors themselves choose to invest – these are all instances where market timing plays a crucial role. In the first example, low P/E ratios tend to result from the stock being sold off on an absolute price basis – choosing only to buy when P/E ratios are lower is effectively timing the market. A closer look at the 2008 crisis selloff reveals that many institutional value investors only chose to buy near the lows – it can be argued that there is an element of timing there as well.
#3: Singapore’s Economic Growth Trajectory Will Always Be This Fast
Given Singapore’s economic miracle since our independence, young Singaporeans have been brought up in a clean and green, economically stable and prosperous nation. Thus it might be tough for millennials, many of whom grew up in the 1990s, to picture a Singapore that is on the decline and a world where SGD isn’t as strong as it is now.
Yet a look at every economy across history goes against this assumption – there will always be weak and strong periods of growth (hence called the economic cycle), and mature economies will grow at slower rates. Adding to that fact is how vulnerable Singapore is to external shocks (through currency, trade linkages, terrorism and so on). Our government has successfully steered us through and helped shield us from previous financial crises, but avoiding a serious downturn is never guaranteed.
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