When is the correct time to buy the STI ETF ? This is an important question which we must ask ourselves. To demonstrate the importance of this question, let me ask a question. If you had bought the STI ETF on November 1999 at a level where the STI is around 2200 points, how long would it take to achieve a positive return ? In the picture below I have highlighted the period for which one bought the STI ETF on November 1999 with a green circle.
The answer to the previous question is 5 years and 3 months ! I have highlighted the period which the STI approaches the level of 2200 with a red circle. If you had bought near the peak of the STI, it will take you a very long time just to achieve a positive return. Moreover, if you had held on to the STI ETF which you had bought on November 1999 up to this present moment, you will be sitting on a paper loss since the current level of STI which I highlighted it with a blue circle is around 1700 and this is lower than your entry point of around 2200. Thus it is important to decide on when to buy the STI ETF.
Logically, one should choose to buy the STI ETF when the market is at its lowest level or when the market turns bearish. In this way, the STI ETF will be able to generate a positive return when the market recovers. However, this will prove to be difficult for the majority of the investing public to do so. This is because when the market is bearish, we would be surrounded with bad news such as economies going into recession, increasing unemployment rate, job retrenchment and so on. This will often induce fear and pessimism into the investing public and thus many will be afraid of buying at this point of time. You can click here to see a picture that describes the emotions experienced by the investing public in a humorous way. If one can overcome the fear of buying when the market is at its lowest level, he or she will certainly be able to achieve a good return on their investment.
So are there any other ways of knowing when to buy into the STI ETF ? In my next post, I will discuss on how can one implement Dollar Cost Averaging or in short, DCA which is a method of buying in for the STI ETF.
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Hi Kay,
ReplyDeleteQuestion for you:
E.g. the average past 10 years STI historical prices is 2300, if STI today is 3057, it is deemed high right? Therefore, I should wait the STI to fall below 2300 in order to buy at bargain prices right?
Do you this method of buying ETF is wise?
Thanks!
Not many of us can time the market to buy and sell. You should use dollar cost averaging (DCA) strategy and it serves as a regular saving plan. This has been discussed previously in the older postings.
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