Blog

10 Interesting Facts About Bear Markets

Bear markets are very common.

A bear market (a market decline of at least 20% from high to low) is a common occurrence in the stock market.

I recently read 10 facts about bear markets written by Tsai Capital, an investment management firm.

Here’s a summary of what I read:

1. Bear markets are defined as a fall of at least 20% from peak to trough. A new bull market occurs when there’s a 20% gain from the most recent trough. Bull markets usually start during periods of maximum pessimism.

2. Bear markets are common. Since 1928, there were 26 bear markets in the S&P 500 index, a US-centric index that consists of major companies like Apple, Alphabet, and Amazon.

3. Bear markets occur, on average, every 3.6 years.

4. Bear markets are usually short-lived since the average length of a bear market is about 9.6 months. That’s way shorter than the average length of a bull market, which is 2.7 years.

5. Bear markets have been less frequent since World War II.

6. During a bear market, stocks lose an average of 36%.

7. 50% of the market’s strongest days in the past 20 years occurred during a bear market. Another 34% of the best days occurred in the first two months of a bull market, when we may not even know that we are past a trough. That’s why we shouldn’t time the market.

8. A bear market doesn’t equate to an impending recession. Since 1929, there have been 26 bear markets but only 15 recessions.

9. Over a 50-year investment horizon, you can expect to go through around 14 bear markets. This shows that market downturns are a normal part of the investment process.

10. Bear markets are painful, but overall, markets have been rising most of the time. Over the last 92 years, bear markets made up only 20.6 of those years. In other words, stocks have been on the rise 78% of the time. This is despite pandemics, recessions, inflation, deflation and wars.

Want to be updated on any new investment articles published by Sudhan? Enter your email address below to subscribe to the blog!

Join 711 other followers

We Are More Powerful Than We Think We Are

2 episodes, 2 brief moments, 1 lesson.

“Daddy, that’s a policeman!” shouted my three-year-old son (V) to my wife and me, as we were waiting for our taxi to arrive at Terminal 2 of the Singapore Changi Airport.

“Shall we go and say Hi?” my wife asked V.

Without hesitation, V dragged his mother to the two armed policemen and waved “Hello!” at them.

The policemen reciprocated with a smile and a wave.


A ponytailed girl was playing with her brother at the playground as I was walking back home in my Navy No. 4 after ending my in-camp training (ICT) for the day.

“Are you a soldier?”, the young girl, who looked like she was around five years of age, blurted out innocently.

“Yes”, I said, proudly.

After a while, she waved me goodbye.


Two separate episodes. Two brief moments.

But both powerful.

As a father, I felt happy that the policeman made my son’s day, when he could have chosen to ignore.

As an uniformed personnel who wears my No. 4 only once a year during ICT, I felt elated to make the girl happy, when I could have just walked as if I didn’t hear anything.

Sometimes, we don’t need to do much to make a fellow human being happy — we just need to be present and reciprocate.

Coffee With Sudhan And Brian Feroldi

Brian Feroldi is an investing advocate with over 361,000 followers on Twitter. Here’s an interview with him.

Brian Feroldi is a financial educator, author, speaker, and YouTuber. He has an MBA in finance and has been investing since 2004.

Brian is the author of the best-selling book, Why Does the Stock Market Go Up?

Brian’s career mission statement is “to spread financial wellness.” He loves to help other people do better with their money, especially their investments. He has written more than 3,000 articles on stocks, investing, and personal finance for The Motley Fool.

You can connect with Brian through his website and Twitter account.

Sudhan P (SP): At what age did you get started in investing? 

Brian Feroldi (BF): I started investing at the age of 22 and I’ve never looked back since. Now, I am 40.

SP: How did you get interested in investing, and who inspired you to get started?

BF: I first got interested in the world of finance after reading “Rich Dad, Poor Dad” by Robert Kiyosaki back in 2004. That kicked started my fascination with money and investing.

SP: What was your life like before investing and how is it now?

BF: Investing has literally changed my financial life. My investments have allowed me to pay off all of my debts. It has also become my career.

I simply love investing.

SP: How do you choose the stocks to invest in? What are some of your strategies?

BF: I keep a giant list of potential stocks. From there, I take them through my investing framework. I then buy the ones that score the highest on my checklist at the best valuations.

I plan to rinse and repeat for decades.

Some of the stocks I own are Adobe (ADBE), Fiverr (FVRR), and Zoom (ZM). The full list of stocks I have in my portfolio can be found in my The Motley Fool profile.

SP: What are some of the investing mistakes you have made and what are the lessons learnt?

BF: I have made many mistakes in the past and I’ve compiled them in a Twitter thread. Do check it out!

SP: What led you to start your own social channels (Twitter, YouTube, etc)? 

BF: Twitter was started as a way to share my investing philosophy with the world. YouTube was started because I wanted an excuse to talk to my business partner, Brian Stoffel, each week. There was no grand plan at the start. It just happened and I’ve been consistent with both.

SP: What advice would you give to beginners who want to start investing?

BF: Stock prices and business profits are not at all linked in the short-term, but they are 100% linked in the long-term. Watch the business, not the stock.

And “do nothing” is almost always the right move.

I’ve compiled those tips and more in a Twitter thread that beginners should read.

SP: What do you think is the biggest misconception people have about money?

BF: That it’s either all that matters or that it doesn’t matter at all.

Money hugely impacts our lives, so you should take the time to learn about it.

But, it’s far from the only thing that matters. It’s important to develop a healthy appreciation for money, but maximizing a number on a spreadsheet shouldn’t be your #1 priority in life.

SP: If you could summarise your whole life in one word, what would it be?

BF: Grateful

SP: A parting shot for the readers…

BF: When it comes to investing, we should bear in mind to think for the long term.

How to Begin Your Investment Journey?

A handy guide to starting investing in Singapore.

Investing is a journey, not a day trip, so we need to prepare ourselves for the long haul.

In our previous article, ‘What are REITs? Are they just for retirees?’, we covered some key characteristics of a REIT.

In this article, we will be sharing how to start investing. Here are some questions individuals should ask themselves before investing:

  • Have I already set aside a rainy-day fund? (About six months‘ worth of living expenses is a good gauge.)
  • Am I making my money work hard enough for me to beat inflation?
  • What is my investment horizon; can I set aside some money to invest?

Investing should not be a daunting affair or complex matter. In this article, we want to provide some easy steps on how to start investing.

Open either a CDP account or custodian account

If you are located in Singapore, you need either a Central Depository (CDP) account or Custodian account before you can invest.

A CDP account, which is operated by the Singapore Exchange (SGX), acts as a safe for all your stocks and bonds purchased. Every time you invest in stocks and bonds, they are deposited into your personal CDP account. The advantage of going for a CDP account is that you are the legal owner of the stock you purchase and will enjoy direct interaction with the company (e.g., receiving invites to the annual general meetings, entitlement to voting rights, etc). However, the CDP clearing fee and SGX trading fee are slightly higher compared to custodian fees.

Setting up a CDP account:

  • Ensure you have a bank account with a local bank.
  • Apply for your CDP account here. If you have these information and supporting documents ready on hand, the process will just take approximately 15 minutes.
  • Once you have opened your CDP account, you can log in to the SGX Investor Portal via SingPass to view your stock portfolio and account statements.

Conversely, if you want to invest in overseas stocks, you will have to go for a custodian account instead, as the option of storing investments in CDP accounts is only applicable for Singapore-listed securities. Custodian fees tend to be lower than CDP and SGX clearing and trading fees, and custodians will help to pass on communication from the company to investors while representing them at AGMs and other investor meetings.

A number of brokerages today operate on a custodial basis. This means that the broker will own the shares on behalf of investors. Some examples of such brokers include moomoo, Tiger Brokers, Interactive Brokers, Saxo, Standard Chartered and FSMOne.

Open Your Brokerage Account

A brokerage account allows you to buy and sell investment products such as stocks, REITs, exchange-traded funds (ETFs) and certain bonds.

When selecting your brokerage, consider the following:

  • Market access

Does it allow you to invest in foreign exchanges? If you are looking to invest in overseas stocks, this would be a key factor of consideration.

  • Trading/Commission fees

How do they compare in terms of minimum fees and trading fees? Here is a helpful comparison of brokerage fees compiled by SingSaver. Also consider which brokerage type would suit your needs best – cash accounts, pre-funded accounts, or broker-assisted trading accounts?

Other factors to consider when choosing your brokerage account include the user-friendliness of the web/mobile app interface, availability of useful charting tools, speed of live information, and access to analyst reports and other investor education resources.

There is no limit to how many brokerage accounts you can have with different brokerage houses, so it is possible to test several before settling on one as your primary account.

In the next article, we will discuss the importance of portfolio diversification, and how you can go about doing so.

Sources:

This article first ran on Manulife US REIT’s thought leadership column, Viewpoints, which publishes regular content on the U.S. economy and the office sector. The article has been re-published here with permission.

Want to be updated on any new investment articles published by Sudhan? Enter your email address below to subscribe to the blog!

 

Are REITs Just for Retirees?

Find out more about Singapore REITs and how they are structured.

In our previous article “What are REITs?”, we shared about the types of asset classes and geographical breakdown of REITs listed in Singapore.

In this next article of our #MUSTExplains series, where we share about REITs, the U.S. economy and the office sector, we discuss the reasons why people invest in REITs, and some risks to consider.

REITs may not be as exciting as tech stocks and cryptocurrencies, but here are four popular reasons why investors hold them:

  • Cost-effective way to invest in real estate: Direct property investment is more capital intensive and illiquid, while investing in REITs is more affordable and enables investors to grow their capital in a shorter period of time. It is also more liquid as investors can buy or sell units in a listed REIT on the stock exchange. Real estate is also known to be a hedge against inflation as their prices/rentals increase with inflation.
  • Total return investments: REITs typically provide high dividends and have the potential for moderate, long-term capital appreciation. Long-term total returns of REITs tend to be similar to those of value stocks and exceed the returns of banks’ fixed deposits and lower risk bonds.
  • Stable income stream: As REITs are required to distribute a minimum 90% of their income, their distribution yields tend to be higher than stocks or fixed deposits. SREITs average ~6% in dividend yields and have continued to generate substantial, stable yields through a variety of market conditions. This is why they are preferred by retirement savers and retirees who seek certainty and stability in their returns.
  • Diversification: The returns of REITs typically have a lower correlation with the returns of other equities and fixed-income investments. Investing in REITs thus helps to reduce a portfolio’s overall volatility and improve its returns for a given level of risk.

As with all investments, here are some possible risks when investing in REITs:

  • Market risk: REITs are traded on the stock exchange and their prices are subject to supply and demand conditions. Their prices generally reflect investors’ confidence in the economy, property market and interest rate outlook, among other factors.
  • Income risk: Many factors can affect a REIT’s rental income – for instance, when tenants renew at lower rentals or vacate their space. Therefore, look for stable occupancies, positive rental reversions, and contractual lock-ins of rental rates and other clauses in a REIT’s tenancy agreements to ensure income stability.
  • Leverage risk: If a REIT’s leverage limit approaches too close to the regulatory limit of 50%, it will limit the REIT’s financial flexibility to raise more capital through debt. Furthermore, additional expenses of borrowing such as interest payments and fees incurred in connection with the borrowing will reduce the money available for distribution to unitholders.
  • Refinancing risk: REITs may face higher refinancing costs when loans are due for renewal, or they may be unable to secure refinancing and resort to selling off properties if these assets are mortgaged under the loan. These risks could affect the unit price and income distribution of a REIT.

REIT Structure

Here’s a diagram of a typical REIT structure.

Besides the REIT vehicle, there are three external parties working in relation to it. All three parties are paid fees for their services. They are the:

  • Trustee – Responsible for the ownership and safe custody of the REIT’s assets, they act on behalf of unitholders to ensure the REIT Manager complies with the law and performs its duties as laid out in the Trust Deed.
  • REIT Manager – It manages the REIT in the best interests of unitholders, which includes setting the REIT’s strategic direction, managing assets and liabilities, as well as making recommendations to the Trustee on the acquisition, divestment and enhancement of assets according to the REIT’s investment mandate.
  • Property Manager It manages the day-to-day operations and maintenance at the respective properties.

Most SREITs also have Sponsors – typically but not necessarily property developers which inject properties into the REIT during listing. Many Sponsors continue to support the growth of the REITs by offering them rights to acquire a future pipeline of properties. Sponsors are often also major unitholders of the REITs they sponsor.

In the next article, we will discuss how to start investing in REITs and stocks. Stay tuned!

Sources:

Disclaimer: This article is for informational purposes only and shall not be construed as financial advice or an offer, invitation or solicitation of any offer to purchase or subscribe for any securities of Manulife US REIT in Singapore or any other jurisdiction nor should it or any part of it form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. You should always do your due diligence and seek professional advice before making any investment decisions. None of the information presented are intended to form the basis for any investment decision, and no specific recommendations are intended.

This article first ran on Manulife US REIT’s thought leadership column, Viewpoints, which publishes regular content on the U.S. economy and the office sector. The article has been re-published here with permission.

Want to be updated on any new investment articles published by Sudhan? Enter your email address below to subscribe to the blog!