I have been investing, as well as trading, in the Singapore stock market since I started my journey as a retail investor in 2017 until recently (around July this year) when I started trading as well as investing in the US market – I have also started to share my company analysis on US-listed companies (you can check them out here.)
Recently, I have received some interesting questions from my readers relating to my entry into the US market and in today’s post, I will be sharing with you some of the questions, along with my responses to them…
Question #1: Why did you choose to go into the US market? Is it because of a lack of opportunities in the Singapore market?
Answer #1: The main reason why I’ve decided to enter the US market is because of the word ‘diversification.’
If you have been following the news recently, you’ll know that the Singapore government have been encouraging local businesses (especially SMEs) to expand their operations in other countries – mainly because there is only so much a business can grow in their home country. To entice them from making the move, the government have also provided businesses who do so with various forms of monetary support.
It is the same as far as the stock market is concerned. In terms of opportunities available, there are only 640 listed companies in Singapore as at January 2019 (based on the information I have gotten from Wikipedia.) On the other hand, there are close to about 4,400 listed companies in the United States in 2019 (based on the data I have gotten from TheGlobalEconomy.com) – just from this alone, you can tell there are so much more investment and/or trading opportunities available in the United States.
Also, I am a firm believer of not putting all my eggs into one single market – as such, I believe we should have some form of diversification as far as our investments are concerned – not just in terms of industries, but also in the different stock markets.
Question #2: Since hitting a low in mid-March, the US market have since roared back into bullish territory. On the other hand, the Singapore market is still languishing in bearish territory. Why is this so?
Answer #2: Ask different investors, and very likely you’ll get different answers. If you ask me, my take on this is that, one of the reasons for the swift recovery in the US market is due to the technology companies – where many of them have immensely benefited from the ongoing Covid-19 pandemic, due to a huge number of people working from home, and spending more time at home.
On the other hand, about 40% of Singapore’s Straits Times Index (STI) weightage comes from the 3 Singapore banks (DBS, UOB, and OCBC), and SingTel. As far as the Singapore banks are concerned, the low interest rate environment we are seeing right now (and it will continue to be the case for at least another 1-2 years) means that the banks’ net interest margin will be negatively impacted, and this will affect their earnings to a certain extent in the near-term; as for SingTel, its revenue have been impacted due to stiff competition, along with a loss in roaming income (both data as well as voice) as leisure travelling is not permissible at the moment. Until we see signs of recovery in their results (and hence a positive movement in their share prices), I am of the opinion that the STI is likely to continue to remain weak in the near-term.
Question #3: What are the things I look at when I study about US companies?
Answer #3: If you have been following my company writeups, you will notice that, whether is it a Singapore-listed company or a US-listed one, I look at the same things, namely:
- Their businesses – it must be one that is simple enough for me to understand
- The company’s financial results, debt profile, as well as dividend payouts for at least the past 5 years
All the information can be gathered from a company’s annual report, which can be found in its ‘investors’ relations’ page, which I strongly suggest one to read through as it helps to improve their understanding about a company.
The more you understand about a company, the better the investment decision you will be able to make (and this also significantly improve your odds of getting a positive return from your investment.) I like to think of it as preparing for exams while we were still in school – the more well-prepared we are, the more confident we will be walking into the examinations hall, and the better we will be able to perform (in terms of our final grades.)
Question #4: Can you suggest how I should build my portfolio – particularly, to what extent should I divest geographically?
Answer #4: There are no ‘hard or fuss’ rules as far building an investment portfolio is concerned – it all depends on your comfort level (there’s no point that I tell you that you should have 50% of your portfolio consisting of Singapore-listed companies, and the other 50% consisting of US-listed companies, but you’re not comfortable with this allocation.)
I personally have seen individuals with a portfolio consisting solely Singapore-listed companies, individuals with a portfolio with just US-listed companies, as well as individuals with a portfolio consisting of a mixture of both – and they all have gotten pretty decent results.
Having said that, you are the best person to answer this very question.
I hope you find my responses to these questions useful.
Personally, whether is it investing in a new stock market, or how one should build their investment portfolio, there is really no ‘one size fits all.’ You need to be comfortable with all the investment decisions you make.
If there’s anything else you’d like to ask, please feel free to get in touch with me with your questions here.
With that, I’d like to wish you the very best in your investing journey!
Disclaimer: Do take note that everything you have just read in this post is my personal opinion which I am sharing for educational purposes only.
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