Do you guys think SGX is a good country to invest shares in? - Seedly
 

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Asked by Vanessa Ann

Asked on 03 Apr 2019

Do you guys think SGX is a good country to invest shares in?

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Yeo Enk Loui
Yeo Enk Loui
Level 6. Master
Updated on 07 Jun 2019

Hey Vanessa!

I guess that depends on your investment profile! I'll just draw comparison between SG and US to illustrate this.

SG

Investing in SGX is good if your main objective is make passive dividend income as the SGX provides many high yielding dividend stocks and good real estate investment trusts (REITs) with 4% to 12% dividend yields. In fact, SGX’s competitive advantage lies in its established REITs market.

US

However, if you are looking to invest in growth stocks and capital appreciation on your investments, perhaps you can look towards investing in the US Exchange, particularly the NYSE/NASDAQ, where the market is more liquid and the volume is way higher than that of the SGX. Over the course of the past few years, the NASDAQ and S&P 500 (US Index) has consistently outperformed the STI (SG index)

In fact, the STI only increased by 5 years or so, as opposed to ~150% and 90% for the NASDAQ and NYSE accordingly. Of course, this does not take dividends into account but even so, STI truly pales in comparison to both NYSE and the NASDAQ.

However, returns are not absolute and higher returns also mean higher risks! Ultimately, whether you should invest in the SGX depends on your goals, objectives and risk appetite!

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Vanessa Ann
Vanessa Ann

04 Apr 2019

Thank you. The charts are very helpful!
Lim Boon Tat
Lim Boon Tat, Applied Mathematics at Brown University
Level 6. Master
Updated on 07 Jun 2019

Hey Vanessa, good question.

In making any kind of decisions, I generally do encourage people to go from a macro-view (30,000 feet/helicopter view) before zooming in to look at the weeds/flowers. If it fails the macro-view, does it matter if the details look good?

Before embarking on our value-investing journey, especially in our earlier years when we have more limited funds, it's always important to choose the geography that you're going to invest in. While the company's business may be global, the local country it is in, which exchange it's listed in, the local regulations it has to comply with, play important roles in our decision (or at least it should).

As you mentioned SGX (instead of "Singapore"), you're definitely thinking of equities/securities as investments (instead of say, property/land). Given the many trading platforms available today, the abundance of information online and the globalised nature of business in this day and age, one question we need to ask ourselves is: is it easier or harder for us to GET the necessary information we need to make a considered investment decision from Country X? Country X could be Singapore, Japan, U.K, U.S. etc. What makes Country X better than Country Y? Is it liquidity? Is it the information? Is it that to get this company, i have to be investing in Country X? Are there nothing like that in the whole world?

Ultimately, when investing in stocks, the ONLY way we can make money, is literally "Sell at a higher price than when you bought it".

For this to happen, there must be liquidity, OTHER investors must realise the value of the company and start buying in at higher prices etc (you bought the stock from someone else, and you need to sell it to someone else). The good news is that, in general, if the underlying business is good, most of the time, the price will reflect that. the bad news is, it really depends on the exchange and country that it's in.

Bottomline: In this day and age, where we can participate in equities markets globally, we should make a conscious decision on which exchanges suit us best, instead of being limited to the country we stay in.

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Vanessa Ann
Vanessa Ann

04 Apr 2019

Wow this answer is good!