“I’d like to ask your opinion on the announced reduced lot sizes in SGX coming in 2015. Do you think that with the almost certainty (in my opinion) of massive buying starting Jan 2015, many stock prices would rise significantly?
Therefore if I have some capital now, would you advise to buy now, or wait and see market conditions for a few months after Jan 2015?”
If you haven’t heard, the story behind this question is this:
- The SGX announced that board lot sizes (a relic from like, I don’t know, 2,500 B.C.) will be reduced from 1,000 shares to 100 in Jan 2015
- Many shares, which were once out of reach to many investors, will suddenly become SUUUUUPER AFFORDABLE! For example, a single lot of DBS – which now costs around $18,450 – will cost $1,845 with the smaller lot size.
- Singaporeans LOVE it when things are cheaper, so there will be a mad rush to buy all them sharesssssssss
- The higher demand will drive prices up
- Everyone will be happy and dance naked around Orchard Road
It sounds like a great story, except for one problem:
Nobody knows if it’s gonna come true. (especially the naked part)
Something totally unexpected could happen.
Maybe stock prices will go up in Jan 2015, or maybe a huge crazy unexpected event will destroy the stock market.
Like maybe an asteroid will crash into Singapore and tiny green Martians will jump out of it and kill off all the investors in the world. Or worse, maybe the Martians will find investors so sexy that they’ll try to mate with us by disguising themselves as THIS lady:
Things usually turn out differently from what we expect. Why bother trying to forecast the future?
Policies can change
A couple of weeks ago, I bought a Groupon because they advertised that I would get $10 off at checkout. When that didn’t happen because their website screwed up, I emailed them to ask for the $10 to be refunded into my credit card. The reply was essentially, “The technical issue was totally our fault, but we can’t refund your credit card. Sucks to be you. Sorry!!!!!”
(GREAT customer service, Groupon.)
My point is, policies can change. Even if something is announced, published and supposedly cast in stone, it ain’t true till it’s true, sistah.
SGX could postpone the board lot reduction thing. It’s not like they haven’t done it before: Remember back in Aug 2013, when they said that lot sizes were gonna be reduced from the first quarter of 2014? That didn’t happen. Whoops.
I’m still waiting for them to respond to my emails bugging them about it. Maybe they’re busy.
Stories don’t always come true
In 1939, the “story” was that World War 2 was going to kill stocks for sure. Until investors realised that the war would give jobs to thousands, if not millions, of people and actually HELP the US economy, so stocks went up.
In 2010, the “story” was that interest rates were so low that they had nowhere to go but up. Yet, they stayed low for years after that. As I write this in 2014, they’re STILL so low that Flo Rida is considering making a song about them (Interest rates are low, low, low, low, low, low, low.)
In 2012, the “story” was that property prices in Singapore would never fall because of our limited land space. And then the gahmen launched cooling measures because someone complained that Singapore was too hot.
Predictions are for pansies
My point here is that there’s no point trying to PREDICT where stock prices are going. Maybe they’ll rise, maybe they’ll fall. Who knows?
By acting on predictions, you’re no longer a passive investor. You’ve become an active SPECULATOR. And we all know what happens to speculators in the long run. (Hint: There’s some truth in that old trading adage about how 90% of traders lose money)
Instead of speculating, Ignore the news. Let the pundits predict all they want. In the long run, events like these will hardly matter anyway. 50 years from now, I doubt anyone will ever say, “WOW – the SGX reduced the lot size and fundamentally changed the nature of investing FOREVER!!”
So stick to your plan: Invest regularly every month and hold on to your stocks. Focus on slow and steady accumulation.
Spend time with your family and hang out with friends. There’s more to life than the stock market anyway. 🙂