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What to Make of Today’s 3% Fall in the Straits Times Index

As of the time of writing (3:40 pm), Singapore’s market barometer, the Straits Times Index (SGX: ^STI), is down 2.6%, or more than 90 points, to 3,393. Earlier today, it had hit a day-low of 3,354, which represents a fall of easily over 100 points.

Taking into consideration yesterday’s decline of 1.3%, the Straits Times Index has fallen by nearly 4% over two days. In fact, the index has given up all of its gains in 2018 so far, given that it ended 2017 at 3,403.

The numbers above look scary, maybe even horrifying. But, it’s important to keep our cool and realise that the market is simply doing its thing.

Stocks are volatile. From 1993 to 2017, there were a total of 6,411 trading days, and the Straits Times Index more than doubled, without dividends. In that timeframe, there were 870 days when the index lost 1% or more, 242 days with a loss of more than 2%, and 90 days when the daily decline exceeded 3%. I think you can get the idea: The stock market does throw a tantrum from time to time.

Now that we know that substantial daily-declines have happened before with some regularity, we have to then rationally look at the stocks in our portfolio. If the reasons we had bought those stocks in the first place still hold true, then we should be buying more of them if their prices have fallen to a level where valuations are compelling.

In the coming days, the market could fall more – or it could rebound. No one knows for sure. But, what we do know is that scary short-term declines are necessary to earn impressive long-term gains.

Warren Buffett once said, “Be fearful when others are greedy, and be greedy when others are fearful.” There are people who are becoming fearful in the market, as evidenced by the declines in the last two days. The question is, are you ready to be greedy?

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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 contributor Sudhan P doesn’t own shares in any companies mentioned.