Singapore Market is now approaching 3,300

Dear Mr. Tan,

I want to thank you for your advice to wait until the Singapore market comes down to 3,300 index. I held back my investment and can now buy it at a cheaper price. The index is now approaching this level.

Is it save to invest now? Is there still a risk of a recession in America? Will there be a bigger crash?

REPLY

At the current level, the Singapore stockmarket has fallen 15% below its recent peak. In my view, this is a good level for a long term investor.

There is always a risk (but it is uncertain) of a crash. This happened in 1987, 1997 and 2002. Something may happen to trigger a crash. However, looking at the past experience, you find that the market will eventually recover.

I suggest that you adopt the following approach:

1. Identify the amount that you wish to invest for the long term (10 years or more)
2. Invest one third of this amount now
3. Invest the remaining two thirds over the next two months

If there is a crash, you can invest at a lower price to average down the cost of your investments. If the market moves up, it is good to invest in a recovering market.

Note: I intend to adopt this method for my personal savings (for which a large portion is still in cash). I will invest in the STI Exchange Traded Fund in the stockmarket.