Why I'm buying more (also Singapore) stocks now

This article originally appeared on Dividend Titan's Weekly Wealth (Free Email Newsletter).

Did I ever tell you before?

Poker players often watch their opponent's eyes when they see a new card.

What poker players are watching for is see their opponent eyes' reactions when they draw a new card.

They observe, if the eyes widen (dilate), it means their opponents saw something they like. The card must be good.

If pupils get smaller (constrict), it means their opponents saw a card they didn't like.

The pupil is the part of your eye that controls how much light gets in.

This is a totally involuntary reaction.
What happens is this.

Your pupils constrict to cut the lights entering our eyes.

So we don't see too much of the things we want to avoid.

The stock market behaves exactly like our eyes

People don't like to hear bad news. They get frightened. Voices in their head tell them to sell their stocks.

It becomes an involuntary reaction.

As a result, stock prices go down.

Stock market corrections happens all the time.

The market sometimes bounces up. The market sometimes bounces down. But the market will move higher over time.

That's why we invest in great companies for the long term.
And you know what?

Last year, when COVID started, People thought Singapore REITs were going to collapse. People thought our local banks were going to down. Everyone thought the world was coming to an end.

But here we are, more than 12 months later, the market has rebounded quickly. Many stocks went higher than before.

Today, the same thing is about to unfold.

Tech stocks are selling off. Our Straits Times Index (STI) went down 4%. Another involuntary reaction.

And here's the funny thing.
People are now more afraid of higher interest rates than COVID itself.

According to CNBC: "Investors rotated out of growth names, resuming a trend seen earlier this year amid rising fears of inflation and higher interest rates."
And that's what I want to talk about.

This is what most investors get it wrong

You see, people treat interest rates like "gravity" on stock prices. The higher interest rates go, the harder stocks fall.
This is because people think companies might cut back on growth because their borrowing costs will go up.
But I find this is where so many investors get derailed.
"Why is interest rates rising?" I asked myself.

It's because economies are improving. This leads to inflation (rising prices). Your office rent goes up. Landlords make more money. Businesses make more money.

But governments have to slow things down by raising interest rates. You don't want economies to be growing too fast. Otherwise your car, food, housing get too expensive.
It's a balance.
If interest rates go up for the right reasons, I'm going to bet more money in solid businesses.
I'm confident these companies will earn more than today as there are greater economic activity. And pay me more dividends.
What's even better is this.
Vaccination is picking up speed, and I'm confident the economy will slowly re-open. With this comes "pent-up" demand -- spending on things we haven't before, like travelling.
I'm positioning myself for great companies that will benefit when the economy goes back to full speed.
If you want to follow these stocks I'm buying now (for _Diligence _subscribers only), you can check out my Diligence Wealth portfolio.

Sometimes investing can be simple.

Always here for you,

Willie Keng, CFA

Founder, Dividend Titan

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