February 26, 2016 By Calvin Tan Smart Investment

Why A Stock Market Crash Can Be A Wonderful Thing For Singaporeans

Unless you have been living in a cave, you should know that stock prices have been falling drastically since the start of the year and is expected to continue even further.ZomboDroid12022016040709

Many people are frantically trying to sell off whatever shares they have left amid the global recession and prices are slashed more than your annual year-end sale.

Despite this, there are a growing group of knowledgeable investors who are waiting patiently for the perfect opportunity to invest. Want to know the reason why?

Here are 3 reasons why more Singaporeans will start investing in 2016…

1.) Inflation is real; and scary

If you think that the word inflation is a term used by economist just to scare you, think again. Unless your salary has been increasing by 5% per year, your purchasing power is dropping. To illustrate the effects of inflation, assuming you have $1000 in the bank (assuming negligible interest rates) after 10 years you would have approximately $675 left taking into account a 4% inflation.

That’s nearly half your wealth vanishing without you even knowing!

On the other hand, investors can rejoice because as companies raise the prices of their goods and service means higher revenues for them. Therefore, the stock market index will almost always go up in the long run.

2.) The 2016 recession a double edged sword

Imagine walking into a Prada outlet and the manager of the shop announces that they are having a 50% sale for 1 day only. Items would be selling out like hot cakes!

That was exactly what happened during the great financial crisis in 2007-2009

image credits: https://www.fool.sg/2016/01/07/how-much-further-will-singapores-stocks-fall/
image credits: https://www.fool.sg/2016/01/07/how-much-further-will-singapores-stocks-fall/

When stock prices were down by 50%, many people were selling off stocks to cut losses. But value investors were secretly buying up the shares and made a hefty profit when the market returned to its peak.

3.) World’s greatest investor Warren Buffet Made His Billions by investing… even during the economic crisis
In 2008, Warren Buffett declared that he was buying up stocks during the global credit crisis. As a result, he has made billions from it.
I quote: “be fearful when others are greedy, and be greedy when others are fearful.
Here’s a screenshot of Warren Buffett’s net worth ever since he started value investing at the age of 14.


Is Value Investing for You?

There are 2 types of people in this world.

People who are able to spot such golden opportunities but do not take action at all. They watch other people grab at the opportunity and regret at the end of the day and they miss opportunity after opportunity.
The other type seizes the opportunity and gain as much knowledge as they can. They put their new found knowledge to use and reap the rewards.
Which type of person are you?

Learning how to consistently profit from the stock market is based on skill and not a matter of luck. Just like any skill, it can be learnt.


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