2024 was a stellar year for Singapore’s Straits Times Index (SGX: ^STI), which soared 23.5%—the best performance in a decade.
It outperformed every major index in Southeast Asia, defying predictions of modest single-digit growth.
The outperformance teaches us two things.
One, it’s hard to predict where markets will go in the short term.
Second, long-term investing rewards the patient investor.
The question is, where does the stock market go from here?
In the simplest sense, there’s only three ways the market can go: up, down or sideways.
A rising market lifts (some) boats
Let’s start with the first scenario – a rising market.
What if Singapore stocks continue rising in 2025?
For those who are already invested, it’s a good thing. You get to enjoy the fruits of your patience.
But what about those of you who have yet to invest?
It’s natural to feel hesitant. No one likes the idea of paying more for shares when prices were lower last year.
Here’s the thing: it’s possible to pay up for shares, and still make money.
Let me share an example with the Smart Dividend Portfolio — in particular, with Oversea-Chinese Banking Corporation (SGX: O39), better known as OCBC.
The portfolio first bought OCBC shares in March 2020 at S$9.76. A year later, in February 2021, we added more shares at S$10.52. Then, in March 2023, we made another purchase at S$12.20.
This wasn’t about chasing the stock price as it rose. Instead, each decision was based on careful analysis.
The first purchase happened when OCBC shares were trading below their book value. A year later, the second purchase at S$10.52—about 8% higher—still had the same valuation of one time its book value.
By the third purchase at S$12.20, the price-to-book (P/B) ratio had risen slightly to 1.1 times. However, we recognized that OCBC’s improving net interest margin would lead to stronger business performance in the future. That made it worth paying a higher price.
Today, OCBC shares are trading at S$17.10, and all three buys have delivered satisfactory returns, to say the least.
The irrational fear of market corrections
Cynics will say that OCBC shares are no longer as cheap as they were four years ago.
Others may also warn of a possible market correction in the future.
They are right.
Here’s the wrinkle in the argument: OCBC’s valuation was low in March 2020 precisely because there was a sharp market downturn.
You can’t warn against downturns while also wishing for the low prices they bring.
Market corrections give investors the gift of lower valuations, so it’s irrational to fear them while regretting missed opportunities during those times.
Instead of worrying about where the market will go next, why not focus that energy on studying stocks?
The Smart Dividend Portfolio was able to buy OCBC shares during the downturn because the team had spent six years analyzing the business before the opportunity arose.
That deep understanding gave us the conviction to act when prices fell.
That’s the value of long-term investing. The knowledge gained compounds over time and when the right moment comes, it can be used to maximum effect.
Get Smart: Dividends trump a sideways market
But what if the third scenario — that is, a sideways market — plays out in 2025?
That’s where dividends come in.
Since 2020, OCBC has paid out almost S$2.80 in dividends per share or close to 29% of the Smart Dividend Portfolio’s initial buy price of S$9.76.
Our yield-on-cost will be nearly 9%.
In simple terms, the first batch of shares is generating a 9% dividend yield today.
This is the power of patience.
While many obsess over where the stock market will go next, those who stay invested and focus on quality businesses are rewarded over time.
Sadly, patience is a rare virtue in the investing world, but it’s one we cultivate in the Smart Dividend Portfolio.
Our FREE report, ‘7 Singapore Blue-Chip Stocks That Can Pay You for Life,’ reveals stable, dividend-paying stocks with a history of strong returns—even in uncertain markets. Get insights on Singapore’s most dependable blue-chips and see how they can offer you steady income. Download it today to start building your portfolio with confidence.
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Disclosure: Chin Hui Leong owns shares of OCBC Bank.
