Kathy
in Memos & Musings · 4 min read
After speaking to many retail investors and students on the ground, it can be deduced that at least 35% of Singaporean investors would initially prefer to have their investments predominantly invested in local companies.
I think it boils down to these 2 main reasons that I am hearing from them:
For investors who just dip their toes into investing, it is easy to find comfort in investing into something that is tangible to you and that you are very familiar with. These can easily be companies that we interact with on a daily basis or occasionally like DBS, Singtel, SPH, Singapore Airlines or REITs like Capitaland Integrated Commercial Trust. Somehow there is an added sense of security when you invest in something that you can see and touch.
While some other investors feel that if the shares are not held by the CDP account, it isn’t safe. Thus even for some local brokerages that are the custodian themselves, they simply prefer not to open accounts with them, let alone overseas brokerages that have foreign regulators.
Understandably these points are valid, it is undeniable that as investors who just invest mainly in the Singapore markets, we are limiting our investing options severely. There is a huge lack of sectoral diversification in the Singapore markets. The health of our Straits Times Index (STI) depends mainly on our 3 local banks and 1 local telecommunication company. This is not to say that they will not do well in the long run but it is about putting too many eggs in one basket.
So should investors in Singapore be more broad minded and start to be more receptive to other markets like in the U.S. and in China?
Personally I have seen the benefits of investors and my students who are globally diversified in their investments in terms of their absolute returns over the long term. The lack of exposure to high growth segments for the Singapore stock market is what prompted them to look beyond our shores. For investors with a reasonably long runway and are looking at more capital gains, I would say that they are doing what is suitable for them.
On the other hand, not everyone is a growth investor. There are some investors (younger ones in their thirties) whose primary aim is to get dividends by doing income investing. They are happy to get a stable amount of income on a regular basis, although they do acknowledge that they may be limited in their upside over time. And thankfully, they are in a very lucky position where Singapore is a great country for income investing in its local stocks, in particular the Singapore REITs.
Thus, the point I am trying to make is that investing is something personal and to each his own. Even if you find yourself being the minority of what everyone else is doing, it doesn’t mean that you are being wrong or not being open minded. It is only very wrong if you are, for example, looking for more meaningful upside and yet sticking to stocks that are better for dividends. Stick to your own plan and make your own play.
About Kathy
Co-Founder of The Joyful Investors and Manager of The Moneyball Portfolio. I graduated with a degree in Economics in National University of Singapore (NUS). My previous experience with traders at the Merrill Lynch enable me to realize many counter-intuitive truths about how the financial markets work and to uncover the challenges faced by many new investors. We believe that investing can be astoundingly simple and want to make financial education understandable for everyone.
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I used to invest only in Singapore companies until after covid gave me the time to look around after learning that US/China are worth looking in the long time. Your videos gave me more assurance am on the right path. Last few months great time to collect some of these gems!
Very true. many of my friends 100% sg stocks as they only comfortable with that.