DCA STI ETF?

Background story:

I first started investing by purchasing a tiny amount of money into Nikko AM STI ETF and ABF Singapore Bond Index in January this year. To be exact, the amount I bought was $100 and $200 respectively.

The next month, I stopped buying the bond index as I realised it was not really the kind of investment tool I was looking for. However, I did continue with the ETF. As it was my first time investing, I knew I had to be disciplined in order to make this successful. 

This means that I must learn to force myself to buy every month in order to achieve the benefits of dollar cost averaging. (View part 1 here) Well, even luckier for me, the market took a turn for the worse, after peaking at around $3.63, and started dropping in the subsequent months. Being excited that my strategy worked, I continued dollar cost averaging every month.

You can call me being greedy, analytical or both, I eventually decided to invest $2,000 into STI ETF in July at the price of $3.30. I realised that the market was under-performing due to the distractions from the stock market during the world cup season and the property cooling measures by the government back then. It is also true that stock price always drop right after the issuing out of dividends. It was indeed a good catch nonetheless. In fact, I managed to drive down my average investment price from $3.59 in June to $3.39 in July as a result of this ‘lump sum investment’. This comes down to a 5.57% decrease in average cost price. Happy me.

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Now, as of 12 September, I have the choice to continue my unique dollar cost averaging strategy. Given that now, the STI ETF (G3B) price has fallen to a one year low of $3.25, I can pull my stunt again by purchasing another $2,000 or even more. This will definitely drive down my investment price even more.

However, upon deeper self-reflection, I realised that my goal of owning a stock is not to drive down the average cost price. This can lead to a problem in not knowing when to have a ‘stop loss’ when buying into a stock that has an underlying business that is crushing down. Greed can take over me in this case.

This is not the case for STI ETF as it is a microcosm of the Singapore economy. I also believe that the economy will not die. It can, however, crash and that is when I can buy at a cheaper price and continue driving down the cost price.

However, the problem with this seemingly logical thinking is that, I am missing out on other better stocks to buy in this market downturn or correction, whichever you prefer to call it. Due to trade war, we are seeing money running away from the emerging markets like China, which really can be a buying opportunity for many chinese-run companies.  

So, I do see an opportunity cost incurred if I continue focusing on driving down the average cost price of my initial investment at the expense of catching other good and discounted stocks. The grass can indeed be greener on the other side. 

Hence, I should be adopting a buy and hold strategy for STI ETF while opening positions in stocks I like, which I never had the opportunity to buy before. What do you guys think and if you were me, what will you do? 

Disclaimer: Website and the information contained herein is not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice.

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