Over the past few weeks, I have heard different versions of the same question.
“Is it too late to invest in Singapore stocks?”
I understand why investors are asking.
Nobody wants to buy after a strong rally, only to watch prices fall soon after.
But waiting for a pullback carries its own risk too. The market may keep climbing without you.
That can be frustrating.
It can also trigger fear of missing out (FOMO).
And that is when investors are most likely to make decisions they would not normally make.
The Straits Times Index (STI) reached a record high in June. Singapore stocks returned more than 36% over the preceding 12 months, while retail investors poured S$2.4 billion into the market.
But the STI being at a record high is not necessarily your biggest risk.
Your reaction to it could be.
Is it too late to invest in Singapore stocks?
No. A record high does not automatically mean it is too late to invest.
It simply tells us that the market is trading above its previous peak. It cannot tell us whether every stock is expensive, whether prices will fall next month or whether long-term returns from here will be poor.
A market that grows over time must keep reaching new highs.
An index also contains many different businesses.
DBS Group Holdings (SGX: D05) and CapitaLand Integrated Commercial Trust (SGX: C38U), for example, are very different businesses.
DBS’s performance is shaped by factors such as loan growth, credit quality and interest rates, while CICT depends more on rental income, occupancy and financing costs.
Even when the STI is at a record high, their valuations and prospects may differ significantly.
The index level alone cannot tell you whether either stock remains attractive.
Two opposite reactions, one common problem
One investor becomes nervous and stays in cash, waiting for a correction.
Another sees everyone else making money and rushes into whichever stocks are rising fastest.
They appear to be doing opposite things.
But both are allowing recent market movements to decide for them.
Neither is following a proper investment plan.
I have seen this pattern repeatedly. When markets are quiet, interest fades. Once prices rise and the headlines turn positive, investors start worrying that they have missed their chance.
That is human nature.
But fear of missing out is not an investment thesis.
Waiting does not remove risk
It is tempting to tell yourself that you will invest after the next correction.
But how far must the market fall before you buy?
Which companies will you purchase?
How much will you invest?
And when prices finally decline, will you actually have the courage to act?
Market corrections rarely arrive with reassuring headlines. They usually come with uncertainty, falling prices and predictions that things could get worse.
Someone who is afraid to invest at a record high may remain equally afraid after the market falls 10%.
Waiting for a better price can be sensible.
Waiting indefinitely without a plan is not.
You may avoid a short-term decline. But you may also spend years waiting for the perfect moment that never arrives.
Do not invest because of FOMO
Rising markets can make investing look deceptively easy.
Retail trading activity recently reached its highest level in 12 years, while interest in small- and mid-sized companies surged.
It is encouraging to see investors returning to Singapore’s stock market.
But higher trading activity does not mean every stock has suddenly become attractive.
A rising share price does not automatically mean the business has become stronger.
FOMO can push investors to lower their standards, follow institutional buying without understanding the reasons behind it, or chase speculative companies simply because established blue-chip stocks appear expensive.
A rising market can make poor decisions look clever, at least temporarily.
The real danger is not investing at a record high.
It is investing because you are afraid of being left behind.
What should investors do now?
You do not need to choose between investing everything today and staying completely in cash.
Invest gradually instead of pressuring yourself to identify the perfect entry point.
Focus on financially sound businesses that can grow earnings, cash flow and dividends. Then ask whether their prospects justify the price you are paying.
Stay diversified and resist the temptation to chase whichever stock or sector has performed best.
Most importantly, manage your expectations. After such a strong year, the next 12 months may look very different.
Strong past performance often makes us more optimistic just when we should become more disciplined.
Get Smart: What matters more than the STI’s next move
I do not know whether the STI will be higher or lower three months from now.
Nobody does.
But I do know that long-term investing becomes much harder when every decision depends on what the market did yesterday.
You do not need to rush into the market.
But you do not need to hide in cash either.
The STI may be at a record high.
Your investment standards should be too.
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Disclosure: Joanna Sng owns shares of all the companies mentioned.
