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What the Stock Market Crash Means for Normal Human Beings Like Us

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Peter Lin

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There’s going to be a lot of Singaporean money matters being debated in the lead up to the General Elections next week. Or maybe they’re just going to talk about how a town council can still make money even though it’s been “mismanaged”. But is anyone going to talk about the fact that China’s stock market all but crashed last week, not only affecting our region’s stock markets but our currencies as well?

 

Wait, what happened again? I thought the Ringgit dropping was a good thing for us!

Well, yes, we did see the Ringgit fall below 3 to our Singapore Dollar last week, and the Australian Dollar is equal to us, but at the same time, the US Dollar has now risen to 1.418 to our Singapore Dollar as of today. And we have the Chinese stock market to thank for all this.

Since June, the Chinese stock market has been dropping due to several factors: a devalued currency, a slowing economy and an overinflated demand for stocks from people who had taken loans to enter the stock market.

However, last week, it plunged, dragging the rest of the world down with it. Including us as well. Our STI dropped 4.3% in a day – the biggest one-day drop since 2008. This created a downward spiral of sorts, with big investors selling in the fears of yet another economic recession.

 

So, should we panic?

Thankfully, no. To put it simply, this is not a recession. What we are seeing is not really anything new – after all, stocks do fluctuate and go up and down on a daily basis. In fact, just two days after the plunge, the STI rebounded, going up by 1.9%.

What this is, really, is a great time for us small-time investors. The more savvy among us would already have seen this crash coming from as early as July and have made preparations to have cash on hand to buy up stocks that had now become bargains. Stocks that we previously might have been on the fence about, were now too cheap to ignore.

But, if you’re like me, you probably didn’t see the crash coming till after it happened. Don’t worry. There’s still time.

 

Okay, what’s the best thing for us small-time investors to do now?

If you’ve been debating when a good time to get into stocks is, there’s no better time than now. Though it’s harder to determine what’s good to buy when everything is at a discount, you generally want to look for companies that are generally known to be consistent earners. Look out for industries that aren’t as affected by global economies, such as healthcare or services, or companies with diversified interests.

On the other hand, if you’re already investing in the stock market, you’ll know there’s no better time to put more money into it. Pumping in more money into companies that you know will be able to weather this almost-crash will mean that you get more shares at a discount. This has good short and long-run consequences. You’ll definitely make a decent profit when the market bounces back (and it will bounce back), but in the meantime, you’ll also get to enjoy higher dividends.

 

Wait, wait, wait… this all seems very complicated.

Well, yes. There are no short cuts when it comes to investing in the stock market. You can’t expect to rely on someone’s advice and get away with not doing any research of your own.

But if you’re the kind of investor that really isn’t into doing much research or cares to watch the stock market on a regular basis, there’s always the option of Exchange Traded Funds (ETFs).

We’ve talked about ETFs many times before, and even compared the several investment platforms in the market that you can use to purchase them, but here’s a quick rundown:

They’re basically tools to help you invest long-term, by giving you access to stocks and other investment options that would normally be beyond your financial reach.

In fact, if you’re already pumping money into an ETF, you may do well to consider raising the amount you’re investing. If the market stays in this bargain bin stage for a little while longer, you’ll definitely want to take advantage and get the most out of it as possible.

 

Are you inspired to get into the stock market now that things are cheap? Let us know.

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Peter Lin

I am the poster boy for reinventing one's self. I've been a broadcast journalist, technical writer, banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.

  • David Tan

    How do you justify “You’ll definitely make a decent profit when the market bounces back (and it will bounce back)”

    Irresponsible journalism man!

    • Miss Rai

      Peter is right. Any investment book or professional or economist will tell you that it is in the nature of the market to go up and down. So the market will indeed bounce back frm now. And it will continue to go up and down, just as it always has. Peter is right that if you invest in a stable company, you will make a profit when (when, not “if”) the market bounces back. No one can speculate when the market will go up (and those who say they can are foolish), but it definitely will.

      • David Tan

        in your reply, I can already see that you are foolish in ways I don’t even want to point out to you.