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How To Turn $880 Into $1 Million In Volatile Markets

singapore currencyThe near 2% drop in the Straits Times Index (SGX: ^STI) appears to have got some markets commentators close to bursting a blood vessel.

Some have even predicted the end of the bull market, whilst others are apparently vexed that the US Federal Reserve would dare to suggest an end to monetary easing. I’m sure I spotted on foaming at the mouth, but I could be mistaken.

But let’s get things into perspective:

  • The Straits Times Index has fallen by more than 2% on 270 separate occasions in the last 25 years
  • The Straits Times Index has risen by more than 2% on 270 separate occasions in the last two-and-a-half decade
  • There is no correlation between the number of times the index has risen or fallen by 2% in any year and the performance of the index the same year

1998 was an especially volatile year for the Singapore benchmark index. It rose by more than 2% on 40 days. It fell by more than 2% on 41 occasions. But in 1988, the Straits Times Index shed just 8%. It started the year at 1,529 points and ended 1998 at 1,393 points.

2008 was another volatile time for Singapore shares. The index rose and fell by more than 2% on 49 separate days. The index dropped almost 50% that year

However, in 1999, which was the third most volatile year for the Straits Times Index, Singapore shares rose 77%. It opened at 1,400 points on 4 January and ended the year at 2,480 points.

But despite the stock market volatility over the last 25 year, the Straits Times Index has climbed from 833 points in 1988 to almost 3,400 points today. That equates to a return (excluding dividends) of roughly 6% a year. If you tack on another 3% for dividends, the nominal return would be close to 9%.

What this means is that an investor who invested $880 a month in Singapore shares over the last 25 years would be looking at a pot of money worth around $1 million today. But to do so, the investor would also need to ignore market pundits, snub the worrywarts, brushoff the naysayers and carry on investing regardless. It really is that easy.

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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.