Investors are always questioning where the stock market is headed next.
For the record, Singapore’s Straits Times Index (SGX: ^STI) eked out a 0.4% gain in the first quarter of 2023.
This performance would have been forgettable if not for the turmoil in the US financial sector.
The collapse of California’s Silicon Valley Bank set off a chain reaction which quickly spread to New York’s Signature Bank and another Californian institution, First Republic Bank.
That was not the end of it.
The crisis of confidence travelled across the pond to Switzerland, where UBS (NYSE: UBS) was steered into buying its rival Credit Suisse (NYSE: CS) by Swiss authorities.
As fear spread, central banks across the globe stepped up to reassure investors.
Back home, the Monetary Authority of Singapore (MAS) stated that Singapore’s Big Three, namely DBS Group (SGX: D05), Oversea-Chinese Banking Corporation (SGX: O39) or OCBC and United Overseas Bank (SGX: U11) or UOB had minimal exposure to the troubled Swiss bank.
Unfortunately, the story did not end there.
In late March, the US Federal Reserve voted to further increase interest rates by 0.25 percentage points, all while noting that inflation remains elevated.
To be sure, the central bank appears to have softened its stance.
This time around, the committee voting on rate increases acknowledged the US banking sector has been impacted by recent events.
Furthermore, discussion has also shifted towards the extent of future rate increases, saying that they will be mindful of the lag in policy effects.
Despite the assurances, none of the above has gone unnoticed by the stock market.
With the ups and downs in the stock market, it’s no wonder that some investors feel like they are being taken for a ride.
Don’t be fooled, be informed
In times of turbulence, it’s important to keep three simple rules in mind.
1. Do prioritise your mental well-being
Keeping a level head should be your highest priority.
Investing during a market downturn is not just about which shares to buy and what price to buy them at.
You may land the best opportunities at a favourable price, but if you lack the mental fortitude to hold those shares, you will be prone to selling too early.
2. Don’t check on your shares too frequently
Warren Buffett once said that games are won by players who focus on the playing field and not by those whose eyes are glued to the scoreboard.
In other words, you shouldn’t be checking share prices every five minutes.
Staring at the prices will not make you any smarter, nor inform you on where prices are headed next.
3. Do focus on the business
There are things you can control, and things you can’t.
Whether it is a pandemic or a border reopening, The Smart Dividend Portfolio, our flagship dividend service, has kept our attention solely on the business behind the stock ticker.
By staying focused, the portfolio’s net asset value has increased by 30% since its inception.
Get Smart: Don’t try to be perfect
Above all, some investors may hold back from investing.
The typical reason?
They are waiting for “things” to settle down.
In reality, many in this cohort are secretly trying to time the perfect entry.
Unfortunately, going in with such an expectation will set them up for disappointment in future.
Consider these two opposing scenarios:
- If the stock market falls, you will be discouraged and view your entry point as a mistake.
- If the stock market rises, you will be beating yourself up for not investing more.
In our mind, these are self-inflicted wounds that you can avoid.
If you agree, then consider the below instead.
The Smart Dividend Portfolio has kept investing nearly every month since 2020.
Our results which we shared earlier include all the ups and downs over the past three years because we are focused on the only thing that matters: the business behind the stock ticker.
Come rain or shine, we are investing.
Will you?
If you’re looking to invest in 2023, our latest FREE report can guide you. It shows you how to find dividend stocks in SGX, and a nearly fool-proof way of building your portfolio. Many people love dividend investing, but few truly know how to profit from it consistently. Click the link here to download our new report and discover the secrets!
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Disclosure: Chin Hui Leong owns shares of DBS, OCBC and UOB.
