Why Investors Chose The Singapore Market (And Why They Should Give Up)

Also: How My 2019 Clients Outperformed The Straits Times Index by Over 75% YTD (and counting)


...by the way, people seem to really like the meme, so thanks to my editor at Zalfion for that. Just to be specific though - I do know that SGX has more than local stocks, thanks.


---


A couple months back, Singapore entered a technical recession. We raced to see who would lose the most money in the APAC region, and we won.


Or lost, depending how you look at it. :(


I even made a video on it, which will be out on my Youtube Channel soon (once a non-tech person like myself actually FIGURES out how to use Youtube)


During this particular point, there was a flurry of talk on Finance Groups about buying Singapore stocks. Till date, this still confuses me.


…if you can buy a stock, or even a blue chip at a discount, Amazon is probably a much better bet than any local stock at a discount. Or something along those lines.


Read Also: The STI ETF is NOT for beginners... No matter what the Internet says

Some older people have scoffed, but this has only proven to be true, though. The last 4 years of my portfolio performance, and even more so this year - will demonstrate this.


Many investments have outperformed the Singapore Market. As of End October, some carefully selected funds for my clients have done almost 54% since the beginning of January.

Ytd 53.83%. In particular, this fund dropped about 30% before upswinging for over 100%.

Comparatively, the Straits Times Index only had a negative return of over -22% for the same period of time.

Well at least you got lower fees.

So as of end October, many of my clients returns net of fees (investors before Jan 2020) have outperformed the STI ETF by over 75% and counting for the same duration. To emphasize this context, a $100,000 portfolio in both areas at the beginning of this year would have this result: Money Maverick Portfolio: $153,830 Fund: $77,940


Read Also: Geographical Risk - How I've Comfortably Beaten The SNP500 By Double Digits Year To Date


This numerical difference has left my clients with twice as much in capital, including all fees and dividends reinvested for both investments.

See?

Part of this 'clickbait' title is to highlight that it's easier to create a huge disparity in results when your investment is doing well WHILE your opponent's is doing badly. In this case, the majority of opponents that I tend to face are investors who have a staunch support of Singapore stocks.


When you have someone like Loo Cheng Chuan (1M65, sometimes 4M65) write off the Singapore Stock Market but not CPF, you probably know when to call it quits.


But here's a couple of reasons why Investors are still choosing the Singapore Market - and more importantly, why they should consider giving up.


Reason 1: Singapore Stocks Are A Value Buy


Whether or not you look at something blue-chip-y like the STI ETF stocks, or outside of that - this statement is generally true across the board for the majority of local stocks right now.


From purely a price perspective - without accounting for things like fundamental cash flow etc - most stocks can be purchased at a severe discount from their high point.


For example, Eagles Hospitality Trust was priced at 13.7 cents in the last week. When compared to its high for the year at 72 cents, that's a stock that you can get 80% cheaper.


It's a pretty big discount on paper.


Why You Should Consider Giving Up: Not All Undervalued Stocks Recover


Singapore Stocks are not known for their market recovery. I actually covered this in my popular article below.


READ ALSO: Why you should invest aggressively NOW (and how you still can have peace of mind)


Even though the article is approaching its 2nd year anniversary, the statistics are more applicable than ever. Unlike almost every overseas market which continually hits new highs, the STI ETF has simply gotten worse.

Slightly under a 34% drop in the last 13 years.

Getting something at a low price doesn't speak anything to its fundamentals. It's taken decades for the STI ETF to filter out underperforming stocks like Starhub and Singapore Press Holdings.


In other words, buying the stock for a much lower price alone gives no indication in the slightest that it would ever recover to its previous highs, or even enough to make your monitoring time and investment money worthwhile.



Reason 2: Singapore Stocks Have Done well before


Some true believers might consider that this period might be the year for said recovery.


I've always suspected that the reason why some people became true believers is for two reasons


1) Many personal finance articles on the STI ETF back in 2017 or earlier that suggested the annualized return was 7% since inception - which was true, except it set a really bad precedent for future expectations - which took all of 5 minutes for me to toss out using something called context.


For the many, many people still stuck on negative returns in the last 4 years, I really blame those writers. Partly.


2) But to be fairly objective, reason number 2 was probably best demonstrated in THIS picture:

In a 5 and a half year period, the value of the STI more than doubled - for an annualized return of about 14.3%.

Many investors I know got their investment advice from parents or older people who actually got involved in investing from the creation of the STI ETF after 2002 - which was incidentally, post dot.com crash.


And those same people made a really decent amount of money, because prices were really low - giving them a reasonably hefty return up to the 2008 Financial Crisis.


Its natural for someone's opinion to be skewed after that, but sadly there's been no historical data to suggest this could turn around.


Why You Should Consider Giving Up: Low Potential Returns, Better Options


a) Low Return on a Value Buy:


From the graph before, we can see that there's been a 34% drop from its previous high. Which means that even if it could be restored to its old high, it would only be a 57% gain.


It wouldn't be fair to suggest that blue chip stocks like those of the Straits Times Index should be considered actual value buys like filtered and well researched value stock picks.


But the majority of indices would be lower in value as well, with a better history of appreciation.


b) Better Options:


Some funds from other countries already have demonstrated a single year return that is higher than that of the aimed 57% gain.


This isn't to say that Singapore stocks or the Singapore Index might not eventually surpass its previous high and go on to increase in value. I'm simply suggesting that looking elsewhere will likely get you there faster.

Imagine waiting 13 years for something that took less than a year to acomplish.

Reason 3: Forex Advantage, Bogle Strategy


This brings us to Reason Number 3: a discussion on quality.


I know that the Boglehead 3Fund strategy has been popularized by Personal Finance writers overseas - and some have felt that it should be applied here.


The concept of capturing the entire market with a total market strategy (domestic stocks, international stocks and domestic bonds) sounds appealing on paper.


You have wide diversification, decent returns and low costs.


There are some weaknesses though, which I touched on briefly.


Read Also: High Risk IS High Reward - Here's Why [ft Bogle, Mortgage, etc]


Why You Should Consider Giving Up: Fundamental Weaknesses


It's important to note that the Bogle Portfolio was created for the American investor.


The American Market isn't completely efficient, but its certainly more efficient than the Singapore market.


When you invest in a geographical ETF - which is part of the Bogle strategy - you capture the diversified returns of many sectors and stocks. Stock movement should be mixed - at certain points, some stocks will outperform others and vice versa, so that the entire index performs adequately with lower risk,


But the STI ETF held onto bleeding stocks for the longest time, which demolishes the above statement. If you persistently invest in something where the price keeps dropping, you waste years not recovering until the stocks get thrown out of the ETF - which they did.


Some examples:

SPH took forever to get removed despite a 73% drop from 2005.
Starhub had a sharper 64% drop in the last 5 years alone (to be fair, it wasn't the worst prior)

Investors were stuck in poor performing stocks as part of their STI ETF investment, and we all know the result.



Conclusion


Initially I wrote this piece to flex my client outperformance over some groups of vehemently defensive stock investors in my various Whatsapp and telegram chats, (Not defensive like the stock - the people.)

(Yes I know, immature of me. Why kick someone when they're down? Maybe I'll stop doing that when I'm 30)


…but actually I've gained a certain appreciation for the Singapore market. Or at least, Singapore investors.


I just feel sad, frankly.


When I wrote my first (somewhat critical) STI ETF article years ago, I was just analytical. Something that doesn't work - well...doesn't work. 3 years later, I've only become more and more correct on this point.


But I never actually tried to understand WHY people were so hard up about these stocks until I did enough research and spoke to enough people about their experience, since many of them had years of investing and experimenting that I didn't have.


It's quite painful to see portfolios demolished because it was based from offhand advice or over-attachment to personal experience. If things had been a little different in my life, I might have made similar or worse mistakes.


I'm always open to giving my professional opinions about your portfolio and how I can improve them - especially if you've had years of frustration, loss of capital and just hoping that the dividends you might receive are a small compensation for that.


I can promise to be a little less critical generally.



Money Maverick

Money Maverick is a Licensed Financial Consultant with MAS, who specializes in Investments and Critical Illness Insurance.


As one of the Top Financial Bloggers in Singapore (Feedspot, Withcontent.co), I would be happy to answer any emails and questions you may have, as I have been doing for my readers over the past few years - especially about Insurance and Investing, as it is my forte of personal and professional knowledge.


If you have any such questions about the articles and how it may apply to your finances, you can feel free to drop me a message through any preferred medium (if you prefer privacy).


Facebook: https://www.facebook.com/luke.ho.54

Whatsapp: 91769099


Do like and share my page, https://www.facebook.com/themoneymaverickofficial, if you enjoyed the article.

You can also share the articles with your loved ones in the links below.


The views on his blog are strictly of his own opinion and have no affiliation to any of the companies he works with.

Here are some of my resources on:


1) Investing: Why you should invest aggressively NOW (and how you still can have peace of mind)

2) Insurance: The Newest, Rising Critical Illnesses in Singapore (2019)

3) Retirement and Leverage: Leveraging a Private Annuity, Pros and Cons (ft. Jamus Lim)

4) Spending and Saving: The Biggest Spending Mistakes You DIDNT Even Know you were Making (and how to avoid them)

5) Job Assessment: A Case Study on How a $6k/mth GIrl makes MUCH more money than a $10k/mth Guy

6) Financial Optimization: How I Avoid the Largest 'Fees' of All



Additional Disclaimers: I actually don't have anything against the stocks personally. Who knows, being critical of them may have my views censored but its a risk I'll have to take.


Btw all the pictures are screenshots from publicly available information.


I did not come up with any of the graphs myself! All the funds featured are MAS Approved and verified results.


1) SPDR STI ETF

2) Manulife Investment-Linked Funds List 3) Google Search - SG Yahoo Finance (on the various stock prices)

The views, opinion and information in all articles are those of the author. These materials do not represent or reflect the views of Manulife Financial Advisors nor is endorsed by them. Manulife Financial Advisors shall not be liable or responsible for the materials of the author.

Money Maverick © 2019 | All Rights Reserved | Disclaimer

  • Instagram
  • Facebook
  • YouTube