The price chart comparison of the US’ S&P 500 index versus Singapore’s Straits Times Index (STI) says it all.
Source: Yahoo! Finance Over the past five years, the S&P 500 index (as represented by the green line) has increased by 51% but the STI has gone the other way — to negative 19%. It is no wonder that some investors prefer investing in the S&P 500 index to the STI. But is the STI all that bad? I think not. Could it be a case where investors are grossly overlooking the STI that they can still make decent returns from it in the future? I think so. Let’s explore. Mind the Valuation Gap At the time of writing, the S&P 500 index is valued at a price-to-earnings (PE) ratio of 27x, around the highest it has been for the last 10 years. Its average PE...