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Why the cautiously optimistic investing strategy will continue in 2025

CAGR of a monthly STI ETF dollar-cost averaging was 6.2%.

Cautious optimism is expected to remain the prevailing investment strategy in 2025, as market outlooks persist under the shadow of global uncertainties, including geopolitical and trade tensions, a potential economic slowdown in China, and persistent services inflation in advanced economies, according to SGX Research.

Consensus views suggest cautiously optimistic investors maintain a hopeful outlook whilst being aware of potential risks, emphasising risk management, focusing on long-term goals, sticking to a disciplined investment plan despite market volatility, and diversifying across various assets to mitigate risk.

This familiar outlook has seen Dollar-Cost Averaging (DCA) become a popular investing strategy, supported by modern platforms that offer ways to gradually build exposure in ETFs and stocks.

DCA allows investors to buy fewer units when prices are high and more units when prices are low, thus mitigating some of the timing risks that concern investors.

From 2019 to 2024, the indicative CAGR of a monthly STI ETF DCA was 6.2%, compared to lump-sum investing with a 7.2% annualised total return.

At the end of 2019, the SPDR STI ETF ended the month at S$3.277 per unit. Five years later, this ETF ended 2024 at S$3.850 per unit. This was a 17.5% gain in unit prices, however reinvesting dividends would have boosted the total return to 41.8% or 7.2% annualised, excluding transaction fees.

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