Putting The Stock Market’s Fierce Decline into Context

Yesterday, the Straits Times Index (SGX: ^STI) fell by a mighty 4.3% to 2,843 points. It’s painful and can be somewhat shocking. But let’s put things into context.

There have been 5,821 trading days from the start of 1993 to 24 August 2015. The aforementioned 4.3% fall that was just experienced ranks as the 28th worst day in those 22 years we’re looking at.

In other words, there have been a fair number of occasions when the Straits Times Index has fallen even harder. To put it another way, big intra-day declines are not all that rare historically speaking.

So, there’re two big takeaways here. First, nothing is broken – the market is acting the way it always has. Second, between the start of 1993 and 24 August 2015, the Straits Times Index has gained 86% in total despite the interim volatility that has been present.

An 86% total return after 22 years equates to an annualised return of just 2.86% – that’s pedestrian and nothing to be excited over. But, throw in dividends, and that annual return figure could be reasonably bumped up to nearly 6%. That’s not too shabby.

Looking at history the way I’ve just did will not help to ease the pain if the market steps down further temporarily. But it can help put things into context and prevent our emotions (or a bad read of data) from causing us to make regrettable investing decisions.

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.