For most working adults, our financial resolutions (assuming we even have one) do not deviate much from beating inflation, saving more and working towards a better retirement.
To accomplish all these goals, investing is necessary. And if you are intending to start, we we are here to tell you today why 2016 might be the best year (in recent memory) to get started.
What Happened In 2015?
The investing landscape in 2015 can be best summarised just by looking at the performance of the Straits Times Index (STI). The index tracks the performance of the top 30 companies listed on the Singapore Exchange, and it gives a decent representation of how companies in Singapore are faring in the midst of a challenging economic environment.
As seen in the graph below, the STI dipped drastically in August 2015, and had mostly stayed below the 3,000 mark ever since.
Having started the year below the 3,000 mark, some investors may prefer to steer away from investing in the STI Exchange Traded Funds (ETFs) for the time being. Others might find the price attractive. We are here to tell you why the low price might be a good time to get started.
It is true that past statistics do not give you an accurate forecast for the future. However, this does not mean we cannot learn from our past. Otherwise, what are history lessons for?
Year 2008 and 2009, which was the year of the global financial crisis, saw a huge dip in the STI ETFs, with most retail investors likely to have made significant losses on their investments, regardless of which stock they bought. However, what matters more is the recovery of the stock market that follows after that. Most investors who continued investing would have not only recovered, but also made significant profits in the years that follow.
Since the market is on a downtrend, it serves as a good opportunity for investors who use a dollar-cost averaging method (i.e. investing the same amount of money each month without regards to what the actual share price is) to acquire more shares. This allows them to accumulate shares for their long-term investment portfolio.
From a long-term investing point of view, attempting to time the market is not something we should strive towards. The truth is that generally speaking, there is never a bad year to start saving and investing. A consistent and regular approach towards investing is more likely to pay off over the long run than to simply employ a wait-and-see strategy.
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