Singapore’s Straits Times Index (SGX: ^STI) has pushed past 5,000, not far off its all-time high of 5,102.
A record high tends to put investors on edge.
If you’re already invested, you worry a correction is coming to wipe out your gains.
If you’re sitting on the sidelines, you worry from the other direction: why buy near a record high when prices will eventually fall?
Here’s the uncomfortable part.
The stock market will fall. History says so. Every bull market ends, every rally reverses, every peak gives way to a valley.
The question nobody can answer is when.
How often do markets actually fall?
The risk is real. Corrections – falls of 10% or more – have happened before and will happen again.
The numbers are sobering. Since 1993, the STI has dropped 10% or more in eight out of every 10 years. With falls that frequent, selling sounds like the obvious move. Sell now, wait for the drop, buy back lower.
The upside is clear. You lock in your gains. You sleep at night knowing your profits are safe. That’s the part everyone gets.
The harder part is what it costs you.
What does selling a winner actually cost you?
Take DBS Group (SGX: D05). Its shares have been hovering at all-time highs, trading at well over two times net book value – far above the bank’s historical price-to-book average of around 1.5 times.
You could make a decent case for selling. Bank the premium, wait for shares to drift back to their historical norm, then buy again lower down. The upside is real money in your pocket.
But look at what leaves with you.
DBS is set to pay S$3.24 per share in dividends this year, a yield north of 5% at recent prices. Sell, and that income is gone.
If you’re happy to bank the gains, fine – that’s a trade you can live with. But if you were counting on those dividends for passive income, you’ve just handed yourself a problem. Where do you find another stock paying that kind of yield with the same business quality behind it?
Can you really buy back at a lower price?
Shares revert to the mean eventually, the argument goes. So just wait for a better entry price and buy back in.
The catch is the kind of price you’d be waiting for. For DBS to yield its way back to a bargain – say, past 8% – it wouldn’t be business as usual.
When did DBS last yield anywhere near that? March 2020. The pandemic hit, the market fell by a third in under a month, and vaccines were still a hope. The Monetary Authority of Singapore told banks to cap dividends at 60% of 2019 levels to preserve capital. Payouts were cut overnight.
Sit in that moment. Airports shut, streets empty, no end in sight – and the dividend you were banking on, slashed.
Would you have bought then?
The instinct that makes you sell today to protect your gains is the same one that will keep you out when shares are cheap and the headlines are grim. Most of us tell ourselves we’d stay rational. In practice, fear wins more often than the plan does.
What do you actually want from the market?
Holding at record highs can be uncomfortable. You might feel foolish refusing to sell when history says a correction is on the way. And when it lands, your paper wealth shrinks with the market. That’s the price of staying invested.
Then again, nobody knows when it lands. Could be next week, next year, or after another 30% climb. And there’s no guarantee you’ll buy back cheaper.
So the question worth answering is this: what do you actually want?
If it’s a steady stream of dividends, a diversified portfolio gives you exactly that. The payouts arrive every quarter, market swings or not. No timing needed.
There’s a second point most investors skip over. Good businesses with spare cash don’t just hold their dividends – they raise them. DBS took its dividend from S$0.78 five years ago to around S$3 more recently, a rise of roughly 285% your portfolio collected for doing nothing. Sell to wait for a better entry, and you miss all of it.
Get Smart: There is no right answer, only your answer
The right move was never about timing the market. It’s about knowing what you want and accepting what you can’t control.
Sell because you’ve made enough for retirement? That’s the right call – for you. Hold for the dividend stream? Just as valid. Building wealth over decades and able to stomach the swings? Staying put makes sense.
Your success isn’t measured against the market, or your neighbour’s portfolio. It’s measured against your own goals. The market is just the vehicle that gets you there.
So while everyone else frets over selling today or tomorrow, work out the one thing that matters: what do you need from the market? Decide that, and the rest gets a lot simpler.
Many Singapore stocks fall behind inflation, which means your money quietly loses strength over time. Dividend stocks have a very different track record. Some continued delivering 6% to 13% every year across the toughest market conditions.
In this FREE report, discover 5 crisis-tested dividend stocks that kept rewarding investors while the market struggled. Download your dividend investing guide now.
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Disclosure: Chin Hui Leong owns shares in DBS Group.
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