Why do people buy STI etf when it has been stagnant?

Many investor lack of financial literacy. They dont know how to see chart nor financial statement. They buy just because they "believe". In general, people always say diversify just buy ETF. Unfortunately, some of the big cap in STI is going down trend or no where....

First.... people need to understand what the STI is and consists of - going by SGX's definition: "The Straits Times Index (STI) is a market capitalisation weighted index that tracks the performance of the top 30 companies listed on SGX." - This means that it contains the top 30 market cap companies on the Singapore stock exchange.

1) Why should you buy into STI or Singapore stock broadly as a Singaporean - It's tax free compared to overseas markets where you would pay dividend taxes or capital gain taxes, no fluctuation in terms of exchange rates.

2) Why not?

SGX has not done well in attracting companies to list here in Singapore - definitely has been better performing compared to regional stock exchanges but not at a global level (US & China)

When a company looks at a public listing - they generally pick somewhere they could get a higher valuation and higher liquidity. Singapore just isn't the place.

Of course in a slump, there are always well performing individuals - like in Japan companies like Oisix and Optim corporation are doing relatively well compared to the rest of the small and medium cap companies.

Singapore listed companies are generally tied to the economy in the region & of course tourism/trade - many of them owns significant subsidiaries in regional countries (like Singtel and Wilmar). The region needs to do well before you can see a strong rebound.

I also am not bullish on the government's efforts in promoting new technologies (a debate for another time). And foresee Singapore economy to decline or stagnate for the next 5 years.

My predictions for the next 2-3 years

• Global brokerages will go commission free here in Singapore. You already see TD Ameritrade doing this

• Many retail investors will flock to the US market

• STI will still continue in a slump due to the quality of companies and the overall economy

I do not think that the markets are efficient but operate in a semi-efficient manner for the near future - but my investment strategy has been creating my version of an ETF that beats the index (ANY index).

People also need to realise, the last 2 years' returns has been abnormal with stocks prices x4 or x5 times in less than 1 year. (Tesla, Square, Sea Group etc.)

The prices are definitely inflated on a multiples basis - but the fundamentals now are stronger than the dot com or 07/08.

Singapore retail investors need to broadly expose their portfolios with other markets like Australia, China, Japan, Europe and US. Within each market - there will be winners.

Disclaimer: I do work in the finance sector, but I am not a certified financial advisor and this is not financial advice, invest after doing your own due diligence.​​​

Diversify across asset classes, regions and countries and you should be safe. If you have access to or you have the ability to diversify away from long only strategies, it will be an added bonus.

My guess is that people invest in it just by virtue of it being the cheapest, most commonly used index in Singapore, and also by pure familiarity.

Investors are always susceptible to home bias. You can read more here: https://sg.endow.us/2XtJWLu

When it comes to investing, it is important to invest in an index fund/ unit trust that is able to deliver market returns over a long period of time.

For the STI, it is not an appealing index to invest in because many good Singapore growth companies such as SEA, Razr choose not to list on SGX. STI stocks are limited to SGX listed companies, which are mainly mature companies in sectors like banks, telecoms, and property counters.

I do not believe that it is diversified enough to deliver on term returns.