There are some wisdom and advice that your parents told you when you were a kid.
Don't trust strangers easily
Don't receive candy from people you don't know
Don't open the door or you'll be snatched
They served us well when we were young. There's one that will continue to be valuable advice even in the world of investing.
SGX My Gateway
People often wonder where to get news; where to get more information and do this so-called homework or due diligence.
One place that i can recommend is here.
SGX My Gateway
I don't work for them, nor do they need my miserable marketing but it has some value.
Subscribing to them gives an Economic Calendar of major data releases expected in the coming week. This mailer typically comes on a Friday with a look ahead on Earnings report by SGX listed companies and also some major government or financial institutions upcoming reports.
Now, they also give a weekly investment update on various topics including market and sector reports and highlights. Most are good to know data and some of the updates do teach important investing concepts to newbies.
On 30th May, they released an update on the performance of STI 3 Year Dollar Cost Average Returns. If you're interested, you can look it up.
It seems like a very good returns percentage to report. Especially when STI isn't exactly high at the moment. It even shares about using IRR (Internal Rate of Return) vs ROI (Return on Investment) and their differences. This is good because it teaches about measuring investment performances.
But there is something wrong about the way some numbers were presented. Some numbers that probably need not be part of the article and is slightly flawed in thinking.
What is the problem?
In the last paragraph, it compared the returns of the Top 5 performing STI constituent stocks with the Bottom 5. While i don't doubt that the numbers are correct, and i haven't bother to verify, i am pretty certain they forgot that SATS was not even in STI 3 years ago.
STI components are reviewed twice a year. So in that 3 years, at least 6 reviews have taken place which may or may not lead to a change. And typically, each change involves up to 3 component stocks. They are reviewed according to a set of criteria. Clearly, the comparison of top 5 vs bottom 5 is meaningless because bottom 5 often gets replaced with better performing components.
Now, the maths will still likely give you the return they declared since it is based on month end closing price of STI ETF. But doing that analysis into component level does no good to the article and exposes them on this systemic flaw of their analysis.
Your mom told you not to trust strangers. I think it's good you verify everything even if they're from trusted source. Including your favourite financial bloggers or your investing buddy next to you.
