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The Best Time to Invest

Ever wondered when’s the best time to invest? The experience of a real country (whose identity will only be revealed later!) going back to 1973 might just provide an illuminating answer.

A country in perennial trouble

Year Unemployment rate
1973 4.9%
1982 9.7%
1983 9.6%
1997 4.9%

The table above plots the country’s unemployment rate for a select number of years between 1973 and 1997. The years were chosen for a good reason – the country’s unemployment rate started climbing in 1973 (peaking in 1982) and took a good 24 years before it returned to a rate of 4.9% in 1997.

Along the way, the country experienced one crisis after another:

  • Entered a severe recession in July 1981 which only ended in November 1982.
  • Stock market crashed by more than 20% in a single day in the late 1980s.
  • Entered a war in the Middle East in 1990; lurched into another recession in the same year which lasted eight months.
  • Entire financial system almost collapsed like a domino in 1998 after a big investment firm in the country went kaput, threatening the survival of many of the country’s powerful banks.

Given this back-drop, would you have wanted to invest in the country’s share market at the start of 1982?

Rising in the face of trouble

I guess it’s time to reveal the identity of the country now. Fools, meet the United States of America (for curious minds, the investment firm is Long Term Capital Management). As for its share market, the S&P 500 – a broad and widely-followed market index in the country – had embarked on a huge bull run from 1982 to 2000 and achieved a 976% gain in price. Even investors who had invested in the index back at the start of 1973 would have sat on a 1,006% gain by 2000.

So, what’s the point of all this you might ask? It’s for a very simple reason: To highlight how shares can climb even in the face of huge uncertainty and adversity.

The past 26 years since the start of 1988 hasn’t exactly been all smooth-sailing for Singapore either. Sure, the Singapore we know of today has been nothing short of an economic miracle. But, there were huge challenges Singapore has faced in those years (the 1997 Asian Financial Crisis, 2002 SARS Crisis, and 2007 Global Financial Crisis are just some samples of the challenges we’ve faced and conquered). And in a similar vein to the US stock market, the Straits Times Index (SGX: ^STI) in Singapore has managed to nearly quadruple from 834 points (at the start of 1988) to more than 3,000 points today.

When you should invest

This finally brings me to the title of this article – The Best Time to Invest. From my personal experience, I’ve come to realise that there are investors who think that the best times to invest are when everything’s all rainbows and flowers. Thing is though, huge gains can still be made even when the situation is downright ugly (in fact, the best gains might only be made when things are ugly). Don’t be scared out of investing just because the economy isn’t friendly, unemployment is high, or there’s a war brewing somewhere. Because in the end, all those scary headlines may not matter when it comes to investing.

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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.