The Market A Year From Now

Who says newspapers are boring?

Of course, I can see why some of us might find the contents of a newspaper a little depressing, at times.

After all, who wants to be constantly reminded about tensions in the Middle East, the seemingly intractable insurrections in East Ukraine and the never-ending speculation about China’s economic growth rate?

But thank goodness for the people who put together the cartoon sections in the papers. Oh yes.

These drawings can sometimes be as refreshing as an ice-old glass of calamansi juice on a sultry Singapore afternoon. They can be the perfect antidote to dreary news.

Only the other day I came across a sketch that brought a smile to my face.

Just another day

There was a line drawing of a young girl whose mouth was replaced by a wavy line. Above her head was a thought bubble with the caption “A year from now you may wish you had started today”.

How true!

How often are we guilty of putting things off for another day, only to find that a constant stream of another-days quickly turns into another month and then another year?

Often, and mistakenly, we think that when there is a hill to climb, waiting could make it smaller. So we put off until tomorrow what we can do the day after tomorrow.

But as we all know, the hill doesn’t get any smaller. If anything, the hill can turn into a mountain, which then becomes considerably harder to scale. If only we had started our climb yesterday.

Mirror, mirror

Investing is something that we often try to delay for another day. How many times have you heard that market participants are waiting for the latest US unemployment figures before acting?

Then we have investors who wait in the wings for the latest export data from China; those who are hanging on until central banks announce their interest-rate decisions and those who are sitting on their hands until the latest inflation report, non-farm payroll etc….before acting.

Trouble is, we could wait for a very long time. Or as Peter Lynch once said: “You can’t see the future through a rear-view mirror”.

What’s more, by the time that every unknown is known (if that is even possible) then the stock that we might be interested in could be priced to perfection. In other words, the margin of safety that we need could have evaporated.

There is another danger with procrastinating that often gets forgotten, namely inflation. Every day that our money is not invested is another day that inflation is eroding the purchasing power of our savings.

Beating inflation

Just the other day, Singapore Post (SGX: S08) announced that it will raise postage rates for the first time in eight years.

The company said that since its last price increase in 2006, fuel prices had increased by nearly a third and wages had increased by a quarter. Consequently, it will be hiking postal rates by 15%.

Now wouldn’t it be great if we, too, could boost the buying power of the dollar in our pocket by 15%?

I think we can do better than that.

Since 2006, the Straits Times Index (SGX: ^STI) has increased 3.6% annually. When dividends are included, the total return from the benchmark is around 7% a year. Or put another way, S$1,000 invested in 2006 would have turned into more than S$1,700 today.

In other words, the purchasing power of our savings could have increased not by 15% but by 70% over eight years.

But we could have done even better.

Since 2006, Jardine Cycle & Carriage (SGX: C07) has nearly quintupled; Jardine Strategic Holdings (SGX: J37) has almost quadrupled and StarHub (SGX: CC3) has trebled.

Peter Lynch once said: “There are substantial rewards for adopting a regular routine of investing and following it no matter what.

So, start today rather than waiting for someday because, as far as I know, someday is not a day of the week. If we don’t, then the market a year from now could be here sooner than we would like.

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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.