Investment Strategy In Singapore Stock Market: Fundamental And Technical Analysis

Literature Review

Investing in stocks is uncertain enough whether the resources have been invested into an index fund or individual stocks. It has been seen that an index fund gives a chance to hold a bushel of stocks; for instance, some list stores are put resources into every one of the stocks in the S&P 500 or FTSE index, accordingly protecting the investor from the brunt of any individual organization’s hazard (Bodie, 2013). The advantage of index fund lies in their enhancement. On the other hand, an individual stock speculation, in any case, uncovered the investor to the market as well as to the particular organization risk.

Investment in index fund can be an awesome speculation, especially if there is a great deal of unpredictability in stock markets. Since a record subsidize incorporates many stocks, the swings that a few stocks encounter are quieted by stocks producing steady and unfaltering returns (Hammoudeh et al., 2014). File reserves have been appeared to really beat effectively oversaw common and support stock investments on account of lower exchange charges, administration and execution expenses. Furthermore, it is exceptionally uncommon to discover effectively oversaw stores that convincingly and reliably beat the market. However, construction of portfolios with appropriate analysis can help the investor to earn more than investing in index fund. Nevertheless, earning profit by beating the market index is difficult but from an experienced investor’s perspective it can be attain (Amiram & Frank, 2015).

This particular report summarized the investment strategy of SGD100000 in the Singapore stock market by constructing two portfolio of shares of SGD 50,000 each. The study then compared overall profit/ loss of these two portfolios with return from investment in FTSE ST all market share index. The two portfolios have been construed considering 10 individual stocks.  

Without a doubt, it has seen that index fund is superior to stuffing dollars idle, or having expansion consume them in a bank account, yet many individuals are truly passing up a great opportunity for the opportunity to assemble genuine riches. According to Waqas, Hashmi & Nazir (2015), it can concur that there are sure advantages to putting resources into a list finance. To start with, the administration charges are near zero in light of the fact that there truly is no administration to do. Second, there is no work to improve the situation the speculator. The investor can rest guaranteed that he will claim the best 500 stocks, time frame. Considering these two components, it can be said that for another person to contributing it’s a better than average approach to keep money idle. In any case, before digging into why investor think putting resources into singular stocks is a whole lot better approach to assemble riches, they need to reveal that contributing can be mind boggling and is surely questionable (Dong & Sircar, 2014). It’s not highly contrasting and it’s not for everybody. It can be terrifying in light of the fact that investor can lose their clothes, their home and even sear the hide off their feline. Be that as it may, on the off chance that they have sufficient energy, interest and tolerance to learn you will succeed (Chuluun, 2017). Also, you will beat the file reserves. It is understood a while back that there were 3 approaches to achieve one’s objective of investment (Park et al., 2016). Or, on the other hand for the most part talking, there’s 3 approaches to get rich: Start a fruitful organization, acquire it, or contribute. Investors have never been keen on beginning an organization and to the extent they know they will never get any kind of generous legacy (despite the fact that they are certainly open to this) (Holmquist, Miller & Yook, 2016). In this way, contributing would have been my stick. The reasons why an investor think putting resources into singular stocks is superior to reserves:

1. They will get the lousy with the kind of return it give provided a proper portfolio is constructed;
2. Diversification strategy was followed properly;
3. Sacrificing returns for perceived safety;

Rational and Methodology

As the aim of this investment strategy was to invest SGD 100000 in Singapore Stock market by constructing two portfolios with 10 stocks each [SGD 50000]; the process was started with identifying 15 stocks based on the market capitalization as well as recent trends (Sharma, 2015). Subsequently, one portfolio was constructed with the help of fundamental analysis and the other was constructed using technical analysis.

In order to conduct fundamental analysis, here both justified P/E ratio and justified P/B ratio techniques have been applied. First, all 15 stocks have been considered and the ratios were identified. Subsequently, actual P/E and P/B ratios were compared with justified trailing P/E and justified P/B ratios respectively to identify whether a particular stock is undervalued or overvalued (Han, Yang & Zhou, 2013). After that 10 of them were chosen from 15 selected stocks.

Once the 10 stocks were identified through fundamental analysis, the portfolio was constructed and with the help of excel solver, weights for individual stock has been identified. Identification of weights helped to segregate the SGD 50000 amount for individual stock. Once the portfolio was constructed; trading has been performed on August 28, 2017; September 01, 2017; September 04, 2017; September 05, 2017 and September 06, 2017.    

In order to conduct technical analysis, here both EMA and MACD techniques have been applied. First, all 15 stocks have been considered and both EMA and MACD calculations were performed for each of the 15 stocks. Subsequently, on the basis of calculations whether a stock will be buy or sell position was identified. After that 10 of them were chosen from 15 selected stocks (Liagkouras & Metaxiotis, 2015).

Once the 10 stocks were identified through technical analysis, the portfolio was constructed and with the help of excel solver, weights for individual stock has been identified. Identification of weights helped to segregate the SGD 50000 amount for individual stock. Once the portfolio was constructed; trading has been performed on August 28, 2017; September 01, 2017; September 04, 2017; September 05, 2017 and September 06, 2017.    

In order to understand whether investment in constructed portfolio gave better return than market return; here return on entire SGD 100000 was identified on August 28, 2017; September 01, 2017; September 04, 2017; September 05, 2017 and September 06, 2017.

The detailed calculations related to fundamental analysis, technical analysis and market return has been shown in appendices 1 to 10. From the trading activities it has seen that below are the stocks that were considered under portfolio 1:

As mentioned above, the excel solver results has shown that the initial portfolio was constructed for SGD 50000 and the segregation of fund was as mentioned below:

	Share Price	Number of share	Investment Value
A34.SI	$           0.55	6501	$               11,400.86
AIY.SI	$           1.09	0	$                 2,823.82
BMGU.SI	$           0.67	7878	$                 7,232.26
BSL.SI	$           6.91	945	$                          –
D05.SI	$         19.09	46	$                 2,567.04
H30.SI	$           0.81	4030	$                 4,835.45
R14.SI	$           0.15	23773	$               10,602.81
RC5.SI	$           0.25	7506	$                   355.01
T6I.SI	$           0.27	22788	$                 2,996.43
U96.SI	$           3.14	6043	$                 7,186.33
Total		79510	$               50,000.00

During first trading days, it was found that the portfolio value reduced to $49,975.36. This mean, on 1^st September, the portfolio evidenced a loss of $112.01. Similarly, on 4^th September, the portfolio evidenced a loss of $18.06; on 5^th September, the portfolio evidenced a loss of $187.06; and on 6^th September, the portfolio evidenced a profit of $52.22.

Results and Analysis

On the other hand, during these trading days the market has evidenced loss on 4^th September of $656.87, loss of $100.27 on 5^th September and a loss of $685.24 on 6^th September. Therefore, it can be said that the portfolio constructed here beat the market over this trading period.

The detailed calculations related to technical analysis and market return has been shown in appendices 1 to 10. From the trading activities it has seen that below are the stocks that were considered under portfolio 2:

As mentioned above, the excel solver results has shown that the initial portfolio was constructed for SGD 50000 and the segregation of fund was as mentioned below:

	Share Price	Number of share	Investment Value
A34.SI	$          0.55	996	$                  548.51
A68U.SI	$          1.09	22711	$             24,755.70
AIY.SI	$          0.67	0	$                          –
BN4.SI	$          6.91	645	$               4,462.52
D05.SI	$        19.09	0	$                          –
H30.SI	$          0.81	3989	$               3,211.87
R14.SI	$          0.15	18840	$               2,750.70
RC5.SI	$          0.25	20545	$               5,136.43
T6I.SI	$          0.27	13190	$               3,561.48
U96.SI	$          3.14	1774	$               5,572.78
Total		82690	$             50,000.00

During first trading days, it was found that the portfolio value reduced to $49,938.62. This mean, on 1^st September, the portfolio evidenced a loss of $61.38. Similarly, on 4^th September, the portfolio evidenced a loss of $60.08; on 5^th September, the portfolio evidenced a loss of $140.65; and on 6^th September, the portfolio evidenced a profit of $112.90.

On the other hand, during these trading days the market has evidenced loss on 4^th September of $656.87, loss of $100.27 on 5^th September and a loss of $685.24 on 6^th September. Therefore, it can be said that the portfolio constructed here beat the market over this trading period.

Conclusion

Thus to conclude, it can be said that the portfolio constructed here evidenced an overall profit of around $200 which is more than the return from index fund. In other word it can said that proper structuring of fund enables the investor to earn more than investing in index fund. Irrespective of the stamp duty as well as brokerage charge.   

References:

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