As of last Friday, the NASDAQ Composite Index remains 4% below its all-time high, while the S&P 500 sits 3% lower than its peak. In a surprising turn of events, Singapore’s Straits Times Index reached a record high, closing above 4,500, sharply contrasting the performance of its U.S. counterparts.
Despite these differences, investors on both sides of the Pacific share a prevailing anxiety. Those who hold investments fear a market correction could jeopardize their gains, while those who are hesitant to enter the market question the wisdom of investing at nearly record highs, concerned that a downturn is on the horizon. History indicates that a decline is inevitable; every bull market comes to an end, every rally reverses, and peaks always precede valleys. However, the looming question remains: when will this happen?
The potential for a decline is significant. Market corrections, defined as drops of 10% or more, have been frequent in the past and will occur again. Since 1993, Singapore’s Straits Times Index has fallen by 10% or more in eight out of the last ten years. Similarly, the S&P 500 experiences a correction approximately every eighteen months, while the tech-heavy NASDAQ has historically undergone corrections every two years.
With such regularity of corrections, one might think that selling investments is a no-brainer. The rationale is simple: sell now to secure gains, wait for the inevitable drop, and then buy back in at a lower price. While the advantages are clear—locking in profits and alleviating anxiety—there are important downsides to consider.
For example, looking at DBS Group, whose shares recently closed at nearly S$55 per share, it seems like an opportune moment to sell. The bank’s shares are trading at more than twice its net book value, significantly above its historical price-to-book average of 1.5 times. Selling now could allow investors to wait for a decline back to historical norms before reinvesting.
However, those contemplating selling must also weigh the income they stand to lose. DBS has issued an annualized dividend of S$3 per share in 2025, representing a yield of 5.5%. For investors relying on this dividend income, selling would mean losing a critical revenue stream. Additionally, should DBS’s price drop significantly in the future, its yield could exceed 8%, reminiscent of the market’s decline in March 2020 when the shares fell sharply in response to the pandemic’s onset. In that chaotic environment, dividends were slashed, demonstrating just how quickly an investment’s value can shift.
Psychologically, selling investments at a peak price can create an emotional barrier to repurchasing shares when prices fall. Investors may retreat from entering the market again once a downturn occurs, despite having an initially sound plan. The instincts that drive one to sell in an attempt to protect gains often clash with the emotional turmoil experienced during market downturns. As the saying goes, “Everyone has a plan until they get punched in the mouth,” and the fear that grips investors during declines can leave previously rational decisions seeming impossible to implement.
Holding onto investments during market highs can feel uncomfortable and may lead to feelings of regret for not capitalizing on profits. Yet, no one can predict exactly when corrections will occur, and the market could just as easily rise another 30% before facing a downturn. Additionally, there is no guarantee of successfully timing the market for a buy-back opportunity.
Ultimately, what matters most to individual investors is their financial objectives. For those seeking consistent dividend income, maintaining a diversified portfolio is essential. This approach allows for regular income influxes that are unaffected by market volatility. Plus, lucrative companies, like DBS, often increase dividends over time. DBS has raised its dividend significantly over the past five years, illustrating how passive investors can benefit from inaction.
The key takeaway for investors is not merely attempting to time the market but rather understanding their own goals. Whether deciding to sell based on retirement needs or opting to hold for dividend income, each choice should align with one’s financial strategy. Success in investing is measured not by market performance but by achieving personal financial objectives.
As investors contemplate their next moves, it’s crucial to keep the focus on what is truly needed from the stock market. Recognizing personal investment goals can provide clarity amid uncertainty and guide decisions in an often volatile market landscape.
