How To Make Money In 2014

Some of you might have seen the latest research by Jim O’Neil, the former Goldman Sachs economist, who famously coined the term BRIC in 2001. It refers to the economies of Brazil, Russia, India and China. South Africa was added later in 2010 to extend the acronym by one more alphabet to BRICS.

His latest natty acronym is MINT, which highlights the dazzling economic prospects for Mexico, Indonesia, Nigeria and Turkey. Imagine if he had picked Romania, Ukraine, Bolivia, Burma, Israel, Sri Lanka and Hungary. What would have been the acronym for that, I wonder?

Some of you might also have seen an article in Forbes about the perils that the Singapore economy could face. The article by Jesse Colombo explores why he believes Singapore’s economy is heading for an Iceland-like meltdown. In a nutshell, he thinks that Singapore’s close ties with emerging markets that include Malaysia, China and Indonesia could be our undoing.

Did he say Indonesia?

Could this possibly be the same Indonesia that Jim O’Neil has hailed as the new frontier of the global economy? Is this the Indonesia that the British economist believes has favourable demographics for at least the next 20 years?

The brace of reports highlights a couple of important things.

Firstly, if you think about it logically, neither of the two assertions can possibly be true at the same time. Either Indonesia is heading for a meltdown, in which case it could drag many neighbouring countries down with it. Or Indonesia could experience 20 years of favourable growth, which is what Jim O’Neil believes might happen.

The second thing to note is that these are opinions. The world is full of people who are more than happy to tell you what they think – even if you haven’t explicitly asked them for it.

The point about opinions is that it is not a statement of fact. It is, instead, one person’s view about what he or she thinks could happen.

What happens next?

Last weekend’s Business Times carried predictions about the Singapore market for 2014 by three brokers. Yet more opinions for you to digest.

DBS Vickers believes that Singapore should outperform its Asean peers. In fact, it believes that earnings for Singapore companies could grow around 13% this year. One of its favoured stocks is Hutchison Port Holdings (SGX: NS8U), which the broker reckons could be a proxy for global recovery.

Meanwhile, OCBC Investment Research is “cautiously optimistic” on Singapore stocks. It believes earnings could grow in the “high single digits” this year. Its picks for 2014 include CapitaLand (SGX: C31) and Keppel Corporation (SGX: BN4).

Elsewhere, UBS Securities reckons that earnings could grow around 8% in 2014. It believes that the Straits Times Index (SGX: ^STI) could reach 3,460 points by the end of this year. It has highlighted DBS Group (SGX: D05) as one of its favourite stocks for 2014.

Within the space of 600 words or so, I have flagged up opinions from five unconnected and unrelated sources. Five different groups with five different views about where they believe you should or should not invest your money.

But this is what I think.

When we invest, we have to form an understanding of where we think everything is going rather than what others might think on a day-by-day basis. That is one of the secrets to making money from long-term investing.

The world won’t end

If you believe everything you read, there will be times when you think the world is about to end. Then on another day you might think that everything is hunky-dory. If you make investment decisions on that basis – by flitting from one opinion to another – then you are almost certainly going to make some very bad decisions.

Investing is about looking ahead based on what you know. So here is a fact to consider.

The Straits Times Index is currently valued at around 13 times earnings. If you believe that paying $13 for every dollar of profit that Singapore companies make collectively is expensive, then look for something more rewarding.

But bear this in mind: the earnings yield of the Singapore market is around 7.7%, while 10-year US Treasury yields 2.8%. That is a statement of fact, not opinion.

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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.