Dear Smart Investor,
The S&P 500 has fallen by more than 20% in the first half of 2022, marking its worst start since 1962.
Is it only a matter of time before Singapore’s Straits Times Index (SGX: ^STI) follows suit?
After all, as a small and open economy, Singapore is vulnerable to major global economic events.
Fear of regret
Some US investors might look back at last November and feel a tinge of regret for not selling before the downturn.
It’s different back in Singapore as the STI has not fallen into a bear market.
However, some among us may fear that they may come to regret not selling today with the hope of buying back later at lower share prices.
The reasoning is tempting, given what has happened in the US stock market.
Yet, there is a problem with that reasoning.
If you sell out of fear today, there is a good chance that you will not find the courage to buy when shares are cheaper.
In fact, you may be left second-guessing when share prices rebound, possibly missing out on the next bull market.
Historical data on the S&P 500 supports this theory.
Statistics from Hartford Funds, citing research from Ned Davis, show that half of the S&P 500’s best days over the past 20 years happened during a bear market.
Another 34% occurred during the first two months of a bull market, long before it was clear that a bull market had begun.
In other words, the odds will be against you.
You stand to miss out on more than eight out of every 10 best days by trying to time your exit and entry in the market.
We believe that the same stats will ring true for the Singapore stock market should it fall into a bear market.
Turning fear into action
It’s a fact that inflation and interest rates will have an impact on Singapore businesses.
As investors, we need to recognise that these external factors are outside our control.
Instead of focusing on what we cannot control, we should spend our time on things that we can control.
To get started, let’s begin with the basics …
- You can prepare an emergency fund to tide over any unfavourable circumstances.
- You can also choose to use money that you do not need over the next five years. That way, you will not be pressured to sell your stocks at the wrong time.
- You don’t have to invest all your spare cash at one go.
Taking your time to pick the right stocks can do wonders for your financial well-being down the line.
You may or may not want to buy these stocks today, however, you are guaranteed to be ready if you did your homework beforehand.
At The Smart Dividend Portfolio, we have selected a list of 25 dividend-paying stocks since February 2020.
Should a major decline happen, such as the one in early 2020, we will be able to pick up shares such as DBS Group (SGX: D05) at $19.34.
Today, shares have returned almost 70%, including dividends.
When the fall in share price occurred, we jumped in and bought the shares. But it wasn’t on impulse. The Smart Investor team has been studying DBS shares for many years even before the pandemic struck. The stock price decline simply allowed us to pick up shares on the cheap.
Get Smart: Don’t predict, prepare
As Warren Buffett once said, “Predicting the rain doesn’t count; building arks does.”
At the Smart Dividend Portfolio, we have deliberately put more money in stocks in which we have the highest conviction. We also allocate some money to stocks that we see potential for growth, and some money to stocks that could bring some excitement to the portfolio.
We may not know what the future may bring in the short term. But we know that our flagship service has already collected well over S$3,200 in dividends since inception. And that’s cash in our pockets.
Can you really make money during a recession? Our team has done it multiple times throughout our investing career. And in our upcoming webinar, we’ll reveal our strategies to successful investing during a downturn. Plus, uncover the mindset “secrets” to stay calm, focused and to make smarter investing decisions. Click here to reserve a FREE seat in our “How to make money during a recession” webinar!
Disclaimer: Chin Hui Leong owns shares of DBS Group.