To The Moon

As a Singaporean investor focusing on the US stock and ETF markets, I often face the added complexity of currency exchange rates. Since the US dollar (USD) is strong right now, largely due to the Federal Reserve's hawkish stance, it has been trading at approximately 1 USD to 1.363 SGD. This makes converting my Singapore dollars (SGD) into USD less favorable at the moment.

Current Strategy: Holding Off on Conversions

To mitigate the impact of the strong USD, I’m currently investing only with the USD I already hold in money market funds rather than converting fresh SGD into USD. These funds not only preserve my USD capital but also provide a small return, allowing me to maintain liquidity for potential investment opportunities.

Considerations Before Buying Stocks

The strong USD presents a dilemma when evaluating new investment opportunities. While there are several stocks I want to buy, I have to consider the following:

1. Opportunity Cost:

   Each stock purchase represents a commitment of capital, so I focus on identifying undervalued stocks with solid fundamentals. For example, companies with a strong financial position, consistent earnings growth, or sectors poised for long-term growth appeal to me. This ensures that my capital is allocated efficiently.

2. Dividends in USD:

   Investing in dividend-paying stocks offers a slight hedge, as dividends are distributed in USD. This provides me with additional USD over time, which can be reinvested without the need for further currency conversions. I prioritize stocks with sustainable dividend payouts and a history of consistent increases, as they align with my goal of building a strong USD portfolio.

Looking Ahead to 2025

With 2024 drawing to a close, I’m optimistic about potentially more favorable currency conversion rates in 2025. Here’s why this could happen:

1. Possible Weakening of USD:

   If inflation in the US shows signs of sustained reduction, the Federal Reserve may adopt a more dovish approach, which could weaken the USD. Economic performance in other regions, such as Asia or Europe, may strengthen their currencies relative to the USD.

2. SGD Stability:

   Singapore’s monetary policy, managed by the Monetary Authority of Singapore (MAS), often maintains the SGD within a stable and predictable range against a basket of currencies, including the USD. This stability provides some assurance that exchange rates could normalize.

Strategies for 2025

If the currency conversion rate improves in 2025, I plan to:

1. Gradual Conversion:

   Convert SGD to USD gradually to avoid timing the market, which can be unpredictable. This approach helps smooth out fluctuations in the exchange rate.

2. Broader Investment Diversification:

   Look beyond undervalued stocks to growth stocks and sectors with promising 2025 trends, such as technology, clean energy, or healthcare. Consider US ETFs that track indices like the S&P 500 or sectors with robust potential, providing exposure to diverse opportunities with a single investment.

3. Rebalancing Portfolio:

   Review and rebalance my portfolio to align with 2025 goals. This might involve increasing exposure to high-conviction US stocks or reallocating USD capital to outperforming sectors.

By carefully managing currency conversions and focusing on undervalued opportunities, I aim to maximize the value of my investments while navigating the challenges posed by the strong USD. With patience and strategic planning, I look forward to capitalizing on more favorable conditions in the coming year.