One Important Thing to Remember Now During a Market Decline

The Straits Times Index (SGX: ^STI) in Singapore bottomed at 1,457 points on 9 March 2009 during the Great Financial Crisis that happened over the last decade. Since then, it has more than doubled – a gain of 104% to be precise – to its current level of 2,968 points.

In the interim, the index climbed to a high of 3,454 points on 22 May 2013, only for it to have steadily declined to where it is today. So while that 14% drop from the recent high isn’t pleasant, long-term investors in the Straits Times Index through the SPDR Straits Times Index ETF (SGX: ES3) (an exchange-traded fund that mimics the movement of the index) from March 2009 onwards should be rather pleased with the results.

But here’s something interesting. Despite that ostensibly strong climb by the index (and by extension, the SPDR STI ETF) in those four-plus years, more than half – or 53% – of the index’s trading days saw it decline. We’ve had 1250 trading days from 9 March 2009 till 4 Feb 2014, and 659 of those had been days where the Straits Times Index saw red.

In fact, there were even 159 days where the index fell by more than 1% but yet here we are, looking at Singapore-listed shares that are twice as high as it was back in 9 March 2009.

The point of me pulling out these statistics is to remind us – myself included – that pullbacks in the share market are truly common. And while those daily falls might feel unpleasant and discomforting for a short while (as it can do for everyone), they tend to melt away with the passage of time; that’s how the Straits Times Index has climbed by 104% despite the daily volatility as the index components go on to improve their businesses.

As mentioned earlier, the Straits Times Index has fallen by quite a fair bit from its May 2013 high. Some of its 30 constituents like Jardine Cycle & Carriage (SGX: C07), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), and Olam International (SGX: O32), have really taken it even harder on the chin since then.


22 May 2013


% Change

Jardine C&C




Thai Beverage








Olam International




Straits Times Index




Source: S&P Capital IQ

Those shares might yet fall even further from today’s prices and will almost surely fall hard again sometime in the future. But if you had bought them even shortly before 22 May 2013 on the belief that these companies were being sold at reasonable prices and that they would be churning out much higher profits a decade or two from now, they might yet turn out to be long-term winners despite the current declines (of course, it’s also important to point out that there’s every chance that those four companies were selling at prices far in excess of what their business fundamentals would warrant back in last May).

In any case, it’s times like these – with markets are selling off – when it’s important to remember how daily volatility and short-term price declines look like through the lens of history, i.e. to remember how violent negative short-term swings can often fade away into the back ground of large long-term gain with each passing year.

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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 writer Chong Ser Jing doesn’t own shares in any companies mentioned.