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Sell In May And Go Away?

The Straits Times Index (SGX: ^STI) is falling again. Today, it is down more than 1.5% to below 2,770 points. Since February, the STI has rebounded and heading towards the 3,000 points mark. Now, it is 6.5% down from its peak of 2,960 points. What is happening to the market? Why has it been so volatile these few months?

In actual fact, the market is not much more volatile than before.

STI Chart

Source: S&P Global Market Intelligence

Since 1993, a 20% difference between the peaks of the Straits Times Index with its troughs is not unusual. Looking at the chart above, we are able to see that in some years, particularly during crisis times such as the Asian Financial Crisis or the Global Financial Crisis, the STI can swing more than 100% in value.

In comparison, the difference between the peak of the Straits Times Index with its trough year-to-date is only around 16%, which is considered very low from its history.

Yet, even when the stock market is volatile year on year, an investor invested in the STI since 1993 would have seen his investment gained more than 80% to date. And that is not even including the dividends that he would be enjoying.

Foolish Summary

It may seem that the stock market has been quite volatile in recent months. Yet, the changing mood of the market is not something new. Compared to other years, 2016 has been quite peaceful. Moreover, for a long-term investor, there is really no need for us to be concern with the day-to-day or even year-to-year market volatility. Looking at the long term gains by simply investing in the market, shouldn’t market volatility be our friend rather than foe? After all, it presents to us great opportunity to start investing in the long-term future of the market.

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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 Stanley Lim does not own any shares of companies mentioned above.