Singapore’s benchmark Straits Times Index recently hit a 17-year high, and both the Dow Jones Industrial Average and the S&P 500 have reached record highs post election.
But what does this mean for you as an investor?
Is it time to take profits, or is this the moment to lean into long-term opportunities?
After years of rising interest rates, 2024 marked a pivotal shift as central banks started easing their monetary policies.
If you’re feeling a mixture of excitement and caution, you’re not alone.
Market highs can trigger both fear and greed, but successful investors know the importance of staying grounded.
Here’s how you can position your portfolio for 2025 and beyond.
All-Time Highs: A Reason to Celebrate, Not Fear
When stocks hit new highs, it’s natural to worry about a potential downturn.
Some investors may rush to lock in profits, fearing they’ll lose what they’ve gained.
However, market highs should be seen as milestones of success rather than warning signs.
Great companies don’t stop growing just because their share prices attain new peaks. Instead, they continue innovating and creating value for their shareholders.
Many companies that weathered the pandemic and subsequently the high interest rate environment in the last few years have emerged stronger.
They’ve optimized their operations, controlled costs, and adapted to a challenging economy. These businesses are well-positioned to thrive no matter the macroeconomic environment.
A good example is Singtel (SGX: Z74). The blue-chip telco announced a higher core net profit for its recent first half of fiscal 2025 earnings and also upped its total interim dividend by 35% year on year to S$0.07.
This S$0.07 included a “value realisation dividend” of S$0.014 which came from proceeds from Singtel’s successful capital recycling efforts.
Another good example is Singapore Technologies Engineering (SGX: S63), or STE.
STE managed to grow its revenue and net profit by 13.5% and 20% year on year, respectively, for the first half of 2024.
The engineering giant successfully reorganised its business divisions in November 2020 to push for its next phase of growth.
In 2022, the group even managed to raise its annual dividend from S$0.15 to S$0.16 despite the lingering effects of the pandemic.
Companies with strong free cash flows are likely to continue rewarding shareholders with growing dividend payouts, making them excellent choices for passive income.
By holding on to such stocks, or even adding more of them to your portfolio, you align yourself with their long-term growth trajectory.
Stay Disciplined in a Bull Market
A rising market can tempt investors to chase speculative opportunities or deviate from their plans. Instead:
- Stick to your investment criteria. Avoid buying stocks just because they’re popular.
- Rebalance your portfolio if necessary to maintain diversification.
- Keep some cash reserves to take advantage of opportunities during market dips.
The key is to evaluate the fundamentals. Some questions you can ask about the stocks in your portfolio include:
- Is the company generating consistent revenue and profit growth?
- Does it have a strong competitive advantage?
- Is it returning capital to shareholders via dividends?
If the answers are yes, staying invested can be far more rewarding than attempting to time the market.
By staying disciplined, you ensure that your portfolio remains aligned with your long-term goals.
The Long-Term View: Building Wealth Over Decades
Investing isn’t about predicting what will happen next week or next month—it’s about preparing for the years ahead.
In the short term, markets may fluctuate, but over decades, they tend to reward patience and discipline.
Here’s why a long-term mindset is essential:
- Compounding: Time allows your investments to grow exponentially. Reinvesting dividends and letting capital gains accumulate can lead to substantial wealth.
- Resilience: Long-term investors can weather market downturns without panic, knowing that corrections are part of the market’s natural cycle.
- Focus on Fundamentals: By concentrating on high-quality stocks, you can ignore daily noise and invest with confidence.
Get Smart: The Best Investment Decision You Can Make
At The Smart Investor, we believe that the best investment decisions are guided by patience and research.
Focus on quality stocks with robust fundamentals and growth potential.
Remember, investing isn’t about reacting to today’s headlines; it’s about preparing for tomorrow’s opportunities.
So, as we embark on this new year, ask yourself: Are you investing for the short term, or are you positioning yourself for a lifetime of wealth and passive income?
The choice is yours.
Stay disciplined, stay invested.
Here’s to a smart and prosperous 2025!
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Disclosure: Joanna Sng does not own any of the companies mentioned.
