Saturday, September 15, 2018

5 good reasons to invest in stocks outside of Singapore

I noticed across many Singapore investing blogs are that they tend to only purchase SGX stocks. I tend to agree with some of the points put across, such as the lack of taxes, and also the need to account for foreign exchange rates when purchasing stocks overseas.

I do not, however, think that this should be an impediment towards purchasing great stocks that can be bought everywhere. It is already very easy to purchase foreign stocks, as I have mentioned in my post.

Let's take a good look at some reasons why it is great to purchase stocks overseas.

#1: Exposure to GREAT companies

Lets look at the current state of SGX now. While SGX does hold a respectable number of companies, even many overseas (Australia and China comes to mind), the sheer number of companies available may often mean that there is lower chances of finding a great quality stock. While we may have some companies such as Comfort Delgro in the past that was able to provide consistent and great returns in the past, the current state of Singapore's economy as a mature country has led to lower rates of returns going on further. It is not to say that Singaporean companies, or companies in SGX are doing badly; it is just that sometimes, the grass is legitimately greener on the other side. Why give up one tree for the whole forest, when you could possibly buy the whole damn thing. 


#2: The IPhones, the Mcdonalds', and good ol' Uncle Google

The honest truth about living in Singapore is that we are the epitome of Globalisation. So many of the things we utilize, from the phone that we use to the food that we eat, all come from multiple countries all over the world. Starbucks are plentiful, and Uniqlo is where we go to buy great and affordable clothes. 

It is a simple truth that the SGX just does not have the level of exposure to possible great stocks that we would want, because as investors it would make good sense to buy what we know, and Singaporeans end up knowing more about some foreign products than even local ones. Why not invest in those stocks?

#3: Not putting your eggs all in one basket

I would not be putting the case on here about diversification by buying other countries' stocks exactly, as many people who have taken basic finance lessons will know; diversification is more about buying shares in such a way that industry/company specific risks are reduced. Systematic risks, such as ones that shock a country, may be difficult/impossible to diversify away. Singapore's economy is heavily tied to the current state of trade all around the world. Our economy is heavily affected whenever there is a recession in some of the bigger countries (US, China, etc), due to our heavy trade links and our exposure as a financial and export-based economy. Just buying a US stock, a Chinese stock alone, will not constitute as proper diversification.

My logic for buying shares in other countries, is a simple one. As personal investors, many of us work in Singaporean companies that have our salaries, bonuses and etc tied to the success of this country. We would not want a possible fall in our earned income to go down together with our passive income. It is at this simple junction that we might end up depending on our passive income more, and it would be better if this income came from somewhere other than the Singaporean economy, and also countries that we are not exactly fully dependent on.

#4: Liquidity

The Singaporean market is a great example of great discipline. Purchasing stocks in Singapore can oftentimes take longer, just due to the fact that waiting for a good price for your stocks may take a long while. The upside of this is low volatility. The downside is the sheer difficulty at times in having to wait for a good time to enter the market. Many markets overseas do not have this issue. While still a reason, I must substantiate that as a value investor that this might actually justify buying more Sg stocks, because low volatility might just be a factor for sound business.


#5: Where are the news?

Oftentimes, one would find difficulty in finding news about Singaporean stocks. This might inhibit research and oftentimes leave one unable to make a particular decision about a stock. The great thing about overseas stocks, especially those in the US (just google it) and China (just baidu it) are that there are a lot of news, and sometimes I will read through other anaylsts' or business news that will give me insight that I might have missed otherwise. 

Cheers everyone, and have a great weekend.

P.s. Leave some comments on what you might be curious about, or what I could put up a blog on. Also if my posts can be made more entertaining,insightful or even about the length. 





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