Investing in overseas stocks has become more popular as Singaporean investors eschew the local stock market in favour of stocks with more exciting growth prospects.
This is unsurprising since the local stock market only has around 671 listed companies to choose from compared to the thousands abroad.
Singapore also does not have interesting global enterprises or technology giants such as Meta Platforms (NASDAQ: FB), Microsoft (NASDAQ: MSFT) or Apple (NASDAQ: AAPL).
However, before you completely overlook Singapore stocks, you should note there are in fact a few good reasons to at least hold some of them in your investment portfolio.
No tax and hidden fees
Investors of Singapore-listed stocks are not taxed on their dividends or capital appreciation.
Tax can be a big dampener to your overall investment returns.
For instance, when you invest in US stocks, you will be charged a 30% withholding tax on all dividends paid out to you.
This means you only get to retain 70% of the dividend, which amounts to a substantial sum not to be taken lightly.
Fortunately, this tax law does not apply to Singapore stocks.
In Singapore, investors are not taxed on dividends or capital appreciation.
As an investor, you are able to keep everything you earn, which is a huge advantage.
Furthermore, many brokerages charge a custody fee when you own overseas stocks.
This is usually charged monthly and can further eat into your investment returns.
Different stocks from different sectors
Although the Singapore stock market may not be home to any large tech or e-commerce companies, there are still numerous others to choose from.
Many of these companies have performed well in the past and are likely to continue to reward shareholders handsomely.
For instance, the Straits Times Index (SGX: ^STI) has generated a 6.6% annual return since 2002 inclusive of dividends, a decent return on investment.
The index consists of a mix of REITs, banks, property companies and a telecommunication company.
Most of these companies also have operations and assets outside of Singapore and have diversified business models.
Outside of the index, there are also two property brokerages and a financial technology company that have shown promising growth prospects.
It is, therefore, untrue that there are no good investment opportunities within the Singapore stock market.
Singapore boasts a strong and stable economy
Singapore’s economy has performed admirably over the years.
Our local economy has grown faster than most in the past 30 years and continues to grow at a steady rate despite last year’s setback.
This year, for instance, Singapore’s economy is expected to expand by around 7% as it recovers from last year’s pandemic.
The Ministry for Trade and Industry projects that 2022 should see GDP growth of 3% to 5% for the country.
Singapore has been able to diversify its offerings from finance to the oil and gas industry, enabling it to remain well positioned to withstand risks to any single sector.
In recent years, this little red dot has also managed to develop its manufacturing and biotechnology sectors, which has been the shining light in our economy.
Get Smart: Opportunities beckon
As an investor, I have set aside the bulk of my portfolio in Singapore stocks as many of them pay great dividends and sport decent growth.
The low fees and zero taxes are also a great help in helping me to achieve my financial goals.
There continue to be opportunities aplenty in Singapore as new listings start trickling back and the Singapore Exchange considers the listing of special purpose acquisition companies (SPACs).
These moves could offer many more choices in the future and help to further boost my portfolio’s returns.
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Disclaimer: Royston Yang owns shares of Apple and Meta Platforms.