Asked 2w ago
Doing long term investing, but exposed only to overseas market for now. Is there a need for me to invest in Singapore market? If so, what are some options I can consider in? Or there is no need to consider the local market?
Interesting question! Honestly, I think that wherever you choose to invest, it needs to make sense to you (after due diligence).
The purpose of diversification is to spread the risk across different investments, where each investment by itself should have a purpose. Diversification for the sake of diversification doesn't make any sense.
It depends on your ideal portfolio, generally SG is for stable dividend and US is for growth. You can allocate some portion to SG for consistent dividend income while maintain the remaining in US for growth. And also, i feel that SG market is starting to become "reits index" due to the amount of Reits and banks in the STI index, so you might want to get some quality reits for the income instead (should you want to buy local market)
You do not need to consider Singapore market at all. Many said Singapore market is good for dividends, but can anyone list a few local companies that consistently hike their dividends year after year for the last 20-30 years without dividend cut? Dividend investing is looking at consistent dividend growth not just high dividend yield (which is inconsistent and may be cut anytime). Companies which can consistently hike their dividends for last 30-40 years demonstrate the strength and growth of the organizations. Dividend growth also able to cushion the effect of inflation. You can cruise in the ocean, why stuck yourself paddling a sampang in a pond ?
I don't especially invest in the Singapore market beyond the SG exposure given to me by the broad-based funds I invest in.
For many investors, they want to replicate the Boglehead 3 fund portfolio that is widely adopted in the US. The local equity exposure is to help align your domestic retirement expenses and spends with your equities exposure, as well as match foreign currency risk.
I personally don't think that applies to a small open economy like Singapore because of our open market (we spend more money on Google/Apple/Microsoft/Netflix than on local STI companies).
There is an inclination for investors to buy more local market, which is normal, but that can be at the expense of taking more investment risk. You can read more here: https://sg.endow.us/2XtJWLu
It depends on your investing goal! What are you looking for? Growth or income?
If your answer is skewed towards income, it would be good start investing generously in the Singapore market (especially REITs) as it will give you a flow of passive income in the form of dividends. The more you invest in these income stocks, the more dividend you will passively recieve.
However, we must not overlook diversification. Even though you might be interested in the idea of creating a passive income stream, you should also take advantage of the growth potential of the international market. Allocate some funds for investing into the US and HK markets so you can grow this sum of money over time into a nest egg which you can possibly use for your early retirement since you are looking at long term investing. (Which you are already doing)
In short, you can leave your international investments untouched, but you can start investing in the SG market for diversification's sake. Doing this will balance out your portfolio's volatility risk. And who dosen't like passive income? 😆
Hope this helps!
There is certainly no need to just becasue you are from Singapore. We are small, there are much more people in the world that do not invest in Singapore compared to people who do.
Singapore market is better for dividends for us. Depends if you are going for that or capital gains.
Understand the purpose of why you are investing in the first place. For overseas market and US in particular, their market is much more mature and sophisitcated which is why they are able to allow commission free trading/1 lot share price/Class A,B,C shares as there are multiple types and kind of investors/speculators in the US market. Their size is also immense so growth potential of companies are much better and hence higher returns overall for US market, thus US market is mainly for capital appreciation.
On the other hand, SG market is much less sophisticated and less matured if you compare to other markets, so we still have many restrictions in place set by MAS and also why our market is not as dynamic as other markets. Yes you can find stocks with capital gains (AEM/iFast/Top Glove) etc but our local market is mainly for dividend investing which consist of largely banks stocks and REITs which are pretty consistent at giving out dividends. If you have a significant amount of capital (eg 100K or more) then it would be a good idea to allocate to dividend stocks (5 % yield will generate you $5000 based on your 100k capital) which is pretty decent.
If your capital is small, then I think it makes more sense to buy growth stocks since the dividends will be pretty insignificant until you amass a bigger capital.
There's no need to invest in an asset class if you have no confidence in it.
The entire portfolio should reflect your expectations of the future.
People tend to invest in STI due to their familiarity, not looking into the future.
If you have confidence in the future of Singapore, just get the STI.
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Singapore stock market takes only a very tiny fraction of global (and even western developed countries) market capitalization. So from a pragmatic view it is completely unnecessary to invest into Singapore stocks. Also SG market, as gauged by the STI index, dramatically underperformed over the last 10 years against f.ex. the U.S. stock market.
Possibly the S-REITs of SG could still be interesting, with their relatively high yields, favorably f.ex. via the 3 ETFs, particularly the Lion Phillip S-REIT ETF.