MENU

24 Surprising And Important Things About Investing Every Investor Should Know

Last month, I had shared 23 surprising and important things about the investing world that I think every investor should know of.

All these pieces of information come from my years of studying the market (now numbering over 10) and writing about it for the Motley Fool Singapore (three-and-a-half now).

Earlier in the day, I came across a new factoid that I thought was really worth sharing. So, here it is, the 24th entry in my growing list of surprising and important things about investing:

24. A huge chunk of global government debt now have negative yields

Here’s a fairy-tale type of situation for you to think about.

Let’s say you need a mortgage to buy a house (who doesn’t?). You’re shopping around for banks to borrow from. It’s been a long day of hopping from bank to bank but you finally see it. Like a gleaming oasis appearing in the middle of the most arid desert on earth, a bank that will happily pay you to lend you money shows up in the distance.

You read that right. This bank’s happy to pay you money to lend to you. Instead of forking out interest periodically to service the loan, the bank will be paying you interest instead.

Sadly, there’s no such thing in reality – yet. Why did I tell such a whimsical story? Thing is, many countries in the world are now in a similar situation. Just look at the tweet below from Worth Wray:

Notice the dark blue patch on the bottom right hand side of the chart? Right now, nearly 30% of global government bonds have a negative yield. That’s akin to investors saying to governments around the world: “I’d lend you money, but I’d also pay you to borrow from me. Thank you very much.”

I don’t know about you, but this seems absolutely crazy and surprising to me: You can be paid to borrow money! (Read that again.) This leads me to stock market valuations. In a world where money is cheaper than cheap, you might expect stocks in Singapore to carry sky-high valuations.

But fortunately for investors, that’s not really the case. The SPDR STI ETF (SGX: ES3) currently has a price-to-earnings (PE) ratio of just 12. That’s a fair bit lower than the average PE ratio of 16.9 that Singapore’s market benchmark, the Straits Times Index (SGX: ^STI), had from 1973 to 2010. (The SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of the Straits Times Index.)

For more granularity, we can look at the banking trio of DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39), and United Overseas Bank Ltd (SGX: U11) as examples. The three banks are amongst some of the biggest stocks in Singapore’s market. Right now, they’re all valued at a price-to-book ratio of around 1. These price-to-book ratios also happen to be near 5-year lows for each of the banks.

There are some really interesting (some would call nutty) things happening right now in the bond-corner of the world of finance. Thankfully for some investors in Singapore, that hasn’t really spilled over to our stock markets here… yet.

For more investing insights and updates on what's happening in the world of finance, you can sign up here for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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.