We’re entering the final stretch of 2014 and what a year it has been. The United States Federal Reserve had been paring its large scale money-printing experiment (otherwise known as Quantitative Easing) for most of the year, finally ending the exercise in October. Russia marched into Ukrainian territory earlier in the year, leading to economic sanctions against it from Western countries. The price of oil collapsed drastically just a few weeks ago, dragging Russia’s rouble – which was already reeling from the sanctions – along with it; the giant European nation is now on the cusp of…
We’re entering the final stretch of 2014 and what a year it has been.
The United States Federal Reserve had been paring its large scale money-printing experiment (otherwise known as Quantitative Easing) for most of the year, finally ending the exercise in October.
Russia marched into Ukrainian territory earlier in the year, leading to economic sanctions against it from Western countries. The price of oil collapsed drastically just a few weeks ago, dragging Russia’s rouble – which was already reeling from the sanctions – along with it; the giant European nation is now on the cusp of a possible economic crisis with its central bank raising benchmark interest rates just last week to a staggering 17% to stem the troubling tide.
Closer to our home in Singapore, China had to contend with slower economic growth (though the Middle Kingdom’s gross domestic product growth of close to 8% would be something most developed countries would salivate over) while Japan unexpectedly made a sickening lurch toward recession even after Prime Minister Shinzo Abe’s bold policies to revive the Japanese economy – popularly dubbed as “Abenomics” -were put in place.
These impactful events are just a tiny snapshot of all the major current affairs that are shaping the world for better or for worse and Singapore’s financial markets have felt the reverberations of most of what has transpired across the globe.
For instance, even supposedly stable and stodgy blue chips like the rig builders Keppel Corporation Limited (SGX: BN4) and Sembcorp Marine Ltd (SGX: S51) – both of which serve the oil & gas industry and are an integral part of Singapore’s market benchmark the Straits Times Index (SGX: ^STI) – have slid by more than 16% since the start of June this year in a reflection of the near-50% decline in the price of oil that has taken place since it hit an annual peak of around US$120 per barrel in the same month.
Given all these as a backdrop, it does seem like it’s important for us investors to think hard about how we should invest in the coming year.
The answer though, isn’t about finding some esoteric trading strategies or to jump in and out of stocks while second-guessing which economy would outperform. Instead, the answer is something far simpler and would be the same regardless of whether the question’s asked in 1994, 2014, or 2024 and beyond: Investors should buy and hold great companies at reasonable prices (for those with the inclination and ability to spot them) or dollar-cost-average into low-cost funds tracking broad market indexes and hold them too, for the long-term.
My statement immediately above might seem too basic, too static, and repetitive. But there’re good reasons for that. Good investing advice is supposed to be simple. Also, consider what financial journalist Jason Zweig has to say about the topic:
“I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.
That’s because good advice rarely changes, while markets change constantly [emphasis mine].”
With 2015 just around the corner, you can almost be sure that there’d be something major (likely more than one event) happening in the upcoming year that would have the potential to roil the financial markets. But that doesn’t mean it should fundamentally change the way we invest.
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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 company mentioned.