The Markets Are Falling, But Stay Calm
The markets are ugly. Overnight, the S&P 500 (^GSPC) – a major market index in the US – fell by 3.3%. According to some market commentators, this has caused Asian markets to fall hard too. Singapore’s Straits Times Index (SGX: ^STI) is currently down by 2.6% from yesterday’s close at the time of writing, Hong Kong’s Hang Seng Index (^HSI) has slipped by 3.4%, while Japan’s Nikkei 225 (^N225) has fallen by 4.0%.
It’s easy to panic in a time like this. But it is in times like these that we have to keep a level keel – otherwise we’ll fall prey to our emotions and commit unnecessary investing mistakes.
One of the best ways we can stave off panic is to look back at history. Look at how the market has done in the past to get to where we are today. Turns out, large daily declines in the Straits Times Index are a common occurrence. There have been 5,812 trading days from the start of 1993 to 12 August 2015. Of the 5,812 trading days, there have been 238 days in which the index experienced a daily decline of 2% or more.
From 1993 to today, local bank Oversea-Chinese Banking Corporation Limited‘s (SGX: O39) shares have a 925% gain, including dividends. OCBC’s peer, United Overseas Bank Ltd (SGX: U11), has done even better – its shares have a 1,380% gain over the same time period. Micro-Mechanics (Holdings) Ltd (SGX: 5DD), a manufacturer of precision parts that are used during the assembly and testing of semiconductors, has seen its share price – including dividends – climb by an impressive 1,412% from its listing in June 2003 to today. These examples show that long-term investing works, despite the occurrence of painful short-term declines from time to time.
So, stay calm.