How High Can The Singapore Market Go?

BullMarketIt was only five years ago when people were wondering how low the market could go. They wanted to know to what depths the global markets could plunge in the wake of the banking collapse. Talk was rife at the time about the end of capitalism as we know it. There was even a moment in time when the entire financial system almost came to a grinding halt when banks stopped lending to each other.

This, believe it or not, was only a few short months after the Straits Times Index (SGX: ^STI) had just hit an all-time high of 3,875 points on in October 2007. We eventually found a market bottom when the benchmark index settled at 1,456 points in March 2009. But guess what? With the benchmark now hovering around 3,300 points, people are wondering how high the index of Singapore’s 30 leading companies could reach?

It is only natural to ask, given that the index has doubled in just four years. That equates to a return of around 20% a year before dividends are included. And we can thank the combined efforts of the US Federal Reserve’s Ben Bernanke, Mario Draghi of the European Central Bank and the Bank of England’s Mervyn King for the billions of dollars, euros and pounds they have printed for the stellar performance of shares.

At some point in the not too distant future, though, the three central bankers will have to turn off the printers. That could be the moment when they remove the punch bowl and the moment when the money-fuelled party could end. However, Warren Buffett has some sage words for concerned investors.

When we buy shares, we should consider ourselves as part owners of a business. If we choose our investments well, then we could be a part of a wonderful organisation that could grow and reward us handsomely over time.

It is, therefore, important to invest only in companies that are expected to do well over five to ten years or more. And to try to dance in and out of something that is wonderful based on something as erratic as a stock market index, which can be driven by recent events, is a terrible mistake.

So, how high can the market go?

The answer, quite simply, is that it is totally irrelevant if you are a long-term investor. So, instead of asking how high the market could go, look for good companies which are selling at attractive prices that could reward you over the next five to ten years.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock — Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock — Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead. 

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.