Fazed By The Market Turmoil? Here’s Something To Help

Singapore’s stock market is not an easy place to be right now. The Straits Times Index (SGX: ^STI) has clocked losses in six of the first eight trading days in 2016.

And, at its current level of 2,652 points as of the time of writing (4:18 pm), the market bellwether is sitting at a painful 25% loss from its 2015 peak of 3,550 that was reached in April.

It can be tough to do so, but it’s all the more important for you to keep calm in times like these – losing your cool may result in you committing emotionally-driven investing mistakes. So, I have here some interesting information which I think can help soothe some fraying nerves.

Over the past nine years since the start of 2007, Raffles Medical Group Ltd (SGX: R01), Vicom Limited (SGX: V01), Straco Corporation Ltd (SGX: S85), and Riverstone Holdings Limited (SGX: AP4) have been huge winners in Singapore’s stock market as illustrated in the table below.

Company                              Price gains: 1 Jan 2007 – 13 Jan 2016
Raffles Medical 352%
Vicom 392%
Straco 588%
Riverstone 773%

Source: S&P Capital IQ

Just to highlight the achievements of those four stocks, the Straits Times Index had lost 10% over the same time period. Long-term investors in the quartet would likely be very happy investors given their returns, which had been driven by solid earnings growth as depicted in Chart 1 below:

Chart 1- Earnings per share (EPS) growth for Raffles Medical, Vicom, Straco, and Riverstone
Source: S&P Capital IQ; author’s calculations (click chart for larger image)

But here’s the thing, long-term investors in the four companies have had to sit through torturous times as well. Check out the chart below, which plots the largest peak-to-trough declines that each stock had experienced in each calendar year from 2007 to 2015. As you can see, double-digit percentage declines were nothing out of the ordinary for the quartet in those years.

Chart 2 - Annual maximum peak-to-trough loss for Raffles Medical, Vicom, Straco and Riverstone (2)
Source: S&P Capital IQ; author’s calculations (click chart for larger image)

What this means is, even the best long-term winners in the stock market will see their fair share of painful short-term declines. It also means that satisfying long-term gains can still come despite the occurrence of big drops every now and then.

It’s not easy to be an investor right now, as I had alluded to at the start. But keep the long-term in mind when investing in great companies with bright future prospects. It can be a tremendously bumpy ride over the short-term, but as billionaire investor Warren Buffett once said, “If a business does well, the stock eventually follows.”

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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 owns shares in Raffles Medical Group, Vicom, and Straco.