Is The World More Dangerous Now? What Does It Mean For Investors?

By Stanley Lim, CFA - July 22, 2014 | See also: Z74^STI

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2014 has been quite an eventful year. We are only halfway through and it seems that there are new problems developing every day.
The war in Syria is nowhere close to being settled. The Taliban in Pakistan are gaining ground in the country’s largest city, Karachi. Egypt is still rebuilding itself from its 2013 coup. Israel and Hamas are at conflict in the Gaza strip. Ukraine and Russia are in an intense stare down. Thailand had just gone through its 12^th coup d’état since 1932. Indonesia is set to announce its presidential election results today; but the police is preparing for possible riots. Malaysia had tragically lost two planes this year.
What’s the scary thing here? I could actually go on. With all that’s happening, is the world more dangerous now than before? And – without belittling any of the human tragedy those conflicts and problems have wrought – what would that mean for investors?
Actually, the world has always seemed dangerous. Remember the tsunamis in Japan and Indonesia? Or the global financial crisis? Or the war on terrorism in Afghanistan and Iraq?
What is interesting is this: Despite all these troubles over the past 10 years, the Straits Times Index (SGX: ^STI) has still managed to gain more than 80% excluding dividends. I believe this shows us something: Regardless of macro-economic-related events happening around the world each year, strong companies (some of which might be the constituents of the index) will continue to do well in the long run.
So if you’re feeling fearful as an investor while looking at the news daily, think from the company’s point of view. For instance, if you are looking to invest into Singtel (SGX: Z74), you can ask yourself some questions like the following. How would the war in Israel affect Singtel’s business? How would it change the behaviours of mobile users?
More often than not, the events happening around us are beyond our control. In fact, it’s also often beyond the control of the companies we invest in. When that happens, it becomes important to note that we humans as a group tend to move forward despite all the great difficulties in life. So, the next time you get scared watching the news, bear in mind that this too shall pass.

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