For those asking when to start investing...

A note I found moons ago... When will you begin investing?
 

Photo credit: Will you start now, or will you procrastinate?

Age 18 to 25

"Me invest? Are you kidding?I'm just getting my education. You can't expect me to be able to invest now.I'm young and I want to have a good time. After all, I'll be in college for a year or so. If and when I get out of college, I'll start investing."

 Age 25 to 35

You don't expect me to invest now, do you? Remember I've only been working a few years. Things will be looking up soon and then I'll be able to invest. Right now, I have to dress well in order to make a good impression. Wait till I'm a little older. There's a plenty of time."

 Age 35 to 45

"How can I Invest now?I am married, have children to care for, I have so many expenses in my life. When the children are a little older, I can start thinking about investing."

Age 45 to 55

"I wish I could invest now, but I just can't do it. I have two children in college and it's taking every cent and more to keep them there. I've had to go into debt the last few years to meet the college bills. But that won't last forever, and then I can start investing.

Age 55 to 65

"I know I should be investing now, but money is tight. It's not so easy for a man my age to better himself. About all I can do is hang on. Why didn't I start to invest 20 years ago? Well, maybe something will turn up."

Age over 65

"Yes, it's too late now. We are living with our eldest son. It isn't so nice, but what else can we do? We have Social Security, but who can live on that? If only I had invested when I had the money. You can't invest when there is no income."

Will you start now, or will you procrastinate?

Have fun investing (while you can!),
Omeng

PS1: If you’re a beginner investing in the Philippine Stock Market,  download your investing book here – Investing in the Philippine Stock Market for Beginners! If not, share it to your beginner friends!

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How to win in the stock market

With some major moves were seeing now in the stock market, below is a helpful quick market update from Sir Gus Cosio, one of the respected fund managers in the country. It's interesting to note his emphasis on the need of fundamental investing skills and less focus on foreign activity.

At the end of his note is another excerpt from Wealth Strategy of Truly Rich Club regarding the importance of knowing your objective in investing and focusing on one's proper investment objective. 

Personally, I sometimes wonder if I'm already focusing too much time and all about managing my finances, and if I'm forgetting my objective why  I'm in the stock market in the first place.

And the Gospel yesterday seems to be a good reminder on that:

(Luke 16:11) "So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches?"

 

Photo credit: Now I live in the principle that whatever life presents to me, no matter how small, I'm called to give my best to manage it

You see, before I have this fixation that thinking about this our worldly life is simply not in line with following God's will in one's life. I still didn't have this clear notion of offering whatever you do for the glory of God. And I'm thankful that God has changed it through time. I realized I don't have to wait for heaven to come down before I give my best. Now I live in the principle that whatever life presents to me, no matter how small, I'm called to give my best to manage it, because "the person who is trustworthy in very small matters is also trustworthy in great ones; and the person who is dishonest in very small matters is also dishonest in great ones (Luke 16:10)"

In the end, the challenge is to have a proper perspective, so we don't fall to the trap of  serving both God and money. And in the few years of managing my own financial life, I can say that money is indeed a very great servant yet can be a terrible master.

May we always be faithful (and great) stewards of God's gifts to us!

Have fun investing (and making money serve you),
Omeng  \_(",)/

***

Most markets closed lower on Friday. Perhaps, the euphoria over the postponement by the US FED has waned. In some investors minds, tapering will eventually come, and it is just a matter of time. I hope everyone of us gets real on this issue of FED tapering. Did you ever believe that the U.S. central bank would do this Quantitative Easing forever. If you ever did, you should pick up your old Economics 101 textbooks and learn some economics all over again.

The monetary solution to averting recession was a master move by the FED, but do not forget that it was simply that - a policy solution. For as long as I can remember, the U.S. central bank always carried out the policy response which the underlying economy needed. Any mature fund manager or investor should know that. This is why we should not have such an exaggerated reaction to any of this tapering action. It is but a normal step that a central bank would take after many years of easing.

I venture to say that in the next round, investors will be able to differentiate among markets with strong fundamentals and those whose are shaky. While I do not really want to see a strong PHP, the recent strength of the Philippine currency highlights that hedge funds and carry traders have recognized the local markets strong support. Even as local stocks declined sharply in the past 3 months, there had been enough participation of domestic investors when stock prices turned cheap. This is an encouragement to external investors because it reflects the significance of local investors in providing depth to the market.

Yes, the Philippine stock market is still small by global standards, but the fact is that it is growing at a very strong and deliberate pace. I think Filipino investors must improve their fundamental investing skills and be less influenced by what foreign funds are doing. We should be the ones buying the market cheap rather than the foreign investors. They should be the ones buying after the locals have accumulated their positions. When we learn to do this, we will be the greater beneficiary of the wealth which the stock market is creating.

Have a good week ahead.

-Gus Cosio

***

If We Have a Big WHY Then We Will Find the HOW - Lyndon Malanog

Why do we save and invest? Is it to earn high interest rate at the end of the year? Technically, an investment can be categorized as a good investment if it can outpace the effect of inflation and taxes. But there should be something more than just the technicalities.

A clear windshield is one of the factors a driver needs to drive a vehicle safely.

But this was not my situation five years ago. One evening on my way home while driving my “old reliable” 1980 “Toyota Tamaraw Jitney,” heavy rain suddenly poured. For those who are not familiar with the vehicle, it looks like a passenger jeepney with no built-in windshield washer (sprinkler). I kept this delivery car after we closed our wholesale and retail business in 2000. To clean the windshield, I always bring with me a bottle of water with a hole on its cup so I could squeeze the water out to the windshield to clean it while the wiper is in motion. I find the HOW because I have a Big WHY should I continue simplifying my life and delaying gratification.

The driving condition worsens when moist filled up the inside of the car because of the absence of an air conditioning unit. I now have to wipe the moist every now and then to have a better view of the road. As a result, I have to drive very slowly because my hands are now so busy performing multi-tasking in addition to the heavy rain. I find the HOW because I have a Big WHY should I continue on my way back home and enjoy the warm embrace of my wife and children.

Now, why I am telling you this story and how is it related to “Wealth Strategies?” Friends, our greatest investment in this world is our RELATIONSHIP with GOD, family and friends more than our own earthly desires.

We build wealth to provide a better life for our family and to improve the life of our brothers and sisters. This is our Big WHY.

Today the market is undergoing correction which is only normal because we are already overbought. Nobody could really tell when we will experience an uphill climb again and what we see with our eyes is just like the moist windshield. The investment weather is not so favorable for many and that’s why a lot of people are asking if we are now in the bear territory. These are the times when the men will be distinguished from the boys.

Friends, focus on your Big WHY and then invest for the long term. Our Big WHY is to fund our dreams for our family. Whatever the weather condition, we will always find the HOW to continue our journey because this will mean a better life for our family. Let’s continue putting in something every month. Remember that “Habit is more important than Skill.” Next, we must invest for the long term because if we do all the up and down of the market, it will always be corrected. What we are experiencing today should not change our investment perspective if our investment period is long term.

Today our country’s fundamentals remain strong amidst the correction and sooner or later, maybe and just maybe eight to nine months from now, the foreign investors will realize that it is indeed more fun in the Philippines. Happy investing everyone.

***

PS: The above piece is a short section of a sample Wealth Strategy article of Truly Rich Club from Lyndon Malanog.

Lyndon Malanog is an Entrepreneur and the Financial Coach of Bo Sanchez, Inc.. He continuously gives “Financial Discipline and Wealth Management” seminars to companies and groups as part of his noble mission and advocacy of educating people.

Meet Lyndon (and other awesome speakers) in person in our powerful seminar this coming Saturday (January 25 2014) at Gateway, Cubao! Know how to avoid many mistakes people commit in their financial lives and learn how to win in the stock market!

Get more details here.

Email pinoyinvesting@gmail.com to reserve your seat now.

PS2: For beginners, download your free copy of My Maid Invests in the Stock Market... And Why You Should Too. Click here to download!

Your First Major Investment

Sharing to you another article from Truly Rich Club's Wealth Strategy tackling the importance of learning. 

Why learning?
Case in point:The recent correction of our stock market obviously has surprised many, bringing first hand (unexpected) lessons to those who didn't prepared themselves and just entered probably because of the rumor or news they got about the stellar performance during the first quarter of the year. Now these people have learned that stock market is never a quick-rich scheme. And that we should not expect an easy growth of money in a short span of time.

So before putting your first peso into any stock, be sure you're equipped with proper financial education.You can also watch these free video lessons from Pesos & Sense covering not just investing but the concept of financial planning as a whole.

Enjoy reading!

 

Photo credit: The best leverage you can have during this “Information Age” is the kind of information your head contains and how timely it is, so take time to learn first.

***

Learning Is the First Step and Your First Major Investment by Lyndon Malanog

I heard about the word “savings” from my parents when I was very young but never about Investing. I can still remember my parents telling me the following words of wisdom: “You need to save for you to have a brighter future. Your savings will earn interest and it will be able to fund your dreams for your future.”

For this purpose, they bought me a “piggy bank” so I could save some of the money from my allowance and the money given to me by my ninongs and ninangs on special occasions. So I started putting in coins every day of whatever is left from my merienda allowance because I always had packed lunch daily. I’m also very proud to tell you that until now, I was able to carry on the habit of taking a pack lunch and breakfast for 22 years now as a corporate person.

Anyway back to my story…

The Story of My Piggy Bank

I was also excited to SAVE for my future because I really wanted to travel and visit a lot of places. Most of all, I wanted to visit the United States to meet Captain America, Green Lantern, Spiderman, Incredible Hulk, Thor and the rest of the heroes I read daily in my comics collection.

But four months after, I sawmy mother with a puller in hand. The puller that is being used to remove the hair from her armpit and my father’s mustache is now being used by my mother to remove some coins from my piggy bank. And when I asked her, “What are you doing Mom? I thought that money is for my future?”

She simply smiled and said, “I’ll borrow some of your coins because wehave ran out of budget until the next payday.” And she promised to repay it when we had extra cash next month but of course most of the time, it never happened. As a child, I really wondered about the real definition of future and why is it too soon?

The same thing happened over and over again so my parents decided to solve the problem...

One sunny summer day, we decided to cut open my piggy bank and with all the coins inside it, we rushed to our town’s Rural Bank and opened an account.

You never can imagine how proud I was to own my first ever savings account. I felt so valued by the way the bank personnel smiled and greeted me. I walked out of the bank feeling taller with all the pride and honor inside me.

But after a year, the same thing happened. My parents ran out of cash for more important things so we had to get some from my account. And once again, my future was cut short. My account never reached my future because by the time I went to college, we had to close it to fund some of my initial expenses.

Funding Our Dreams

For a common Filipino the word savings is “normal” but the word “investment” is an alien word.

I’m a grown-up person now and thanks to my mentors in the spiritual and financial industry for all the wisdom, literacy, coaching, mentoring and most of all for their patience until these days.

Now, I understand that our savings must be invested in legal investment instruments to achieve positive growth over the years so as to fund for our dreams.

Any investment in the three asset categories can be beneficial and can make dreams come true but we need to take time to learn first because:

Learning is the first step and your first major investment.

There are a lot more to learn before you actually invest to any investment instrument. Among these are the “Right Investment Concepts” and the “Basic Techniques in Investing.” We need to learn the technicalities and equip ourselves with the tools to manage our own investments.

I don’t recommend anyone to get into any type of investment instrument without fully understanding its nature and purpose. It’s for our own protection and guidance. SCAMS in the Philippines will always come and go because of three main reasons: 1. Financial Ignorance 2. Greed and 3. Fear

Remember that we are the best person to manage our hard-earned money that’s why we need to learn first.

The best leverage you can have during this “Information Age” is the kind of information your head contains and how timely it is, so take time to learn first.

***

PS: The above piece is a short section of a sample Wealth Strategy article of Truly Rich Club from Lyndon Malanog. 

Lyndon Malanog is an Entrepreneur and the Financial Coach of Bo Sanchez, Inc.. He continuously gives “Financial Discipline and Wealth Management” seminars to companies and groups as part of his noble mission and advocacy of educating people.  

Meet Lyndon (and other awesome speakers) in person in our Philippine Stock Market Premier Seminar this coming January 25 at Gateway, Cubao! Know how to avoid many mistakes people commit in their financial lives and learn how to win in stock market!

Get more details here.

Limited slots only so email pinoyinvesting@gmail.com to reserve your seat now.

Investing Tip #4 – Make your investing tasks automatic

In this post I'll be sharing another tip that caters more for investors. The premise is that as long-term investors, we try to invest as less time and attention as possible in building our investment portfolio. This, of course, doesn't mean that we don’t monitor how well our investment is doing. (The third tip - easy monitoring of your stock transactions - actually talks about it.) But if we could find ways to make our assets work hard for us without doing any additional work, we better grab it.

The key is the reason why we want to be investors – we want to make our money work hard for us, that is, to generate more assets that will in turn produce even more assets. We want to be masters of the power of compounding and layering of work, or doing multiple things at the same time. But that's not enough. We want to achieve that same thing without having a drastic change (or none at all) in our current lifestyle.  Unless you’re really for it, we don’t want to make our profits by fixing our eyes on that computer screen for six straight hours every trading day. While that can be done at times, it will without doubt become impractical in the long run especially if you're not doing this full-time.

So if you notice yourself spending too much of your time monitoring your portfolio in a single day, you might want to take a step backward and see if you’re devoting more time than what’s really needed which could otherwise be spent more productively to address more important areas of your financial life.

So how can you make investing automatic?

Photo credit: Simplify by automatic investing

First, make the funding automatic.

This is pretty obvious.
If you have a bank account in BDO, Metrobank or BPI (or any bank that has online facility), make sure you create an online account. This way you can make your financial transactions all online, like paying your bills and funding your investment fund. This is much better and efficient than going to and lining up in a branch and depositing manually.

To eliminate one step further, you can schedule a fund transfer of fixed amount to your investment fund from say your payroll account to make it automatic every after payday. Once it is set-up, paying yourself becomes automatic.

Second, make the buying of stocks automatic.

If your strategy consists of regularly buying every month with a limit stocks price in your mind, then you can use your online brokers' order options. One example will be that of COL's GTC options. GTC (or Good-till-cancelled) is basically a limit order you can place in the market that is going to be valid for sixty (60) calendar days. 

How does GTC work?
Let's say you want to buy a stock but you want it at a price lower than the current market price, you can use this GTC option to place an order that will wait for that stock to go down to your desired price (your buy below price for example) resulting to a matched order for you. This is much better than placing the same order every single day.
(You can get more details about COL's GTC option here)

Using this GTC option, five minutes is the only time you'd need to devote every month for your stocks investments. That includes logging in to your account and setting up this GTC order. After this, you can go back to your normal life. 

Take note that this task assumes you have a desired price and stock in mind - which leads to a third task that can be also made automatic.

Make choosing your stocks automatic

You can also make picking of your stocks and setting your limit prices automatic, and that is by having a mentor do it for you. While you can definitely do all the analysis by yourself, leveraging on someone better than you doing it is not a bad idea either.

Truly Rich Club for example is one way of making this step automatic.

This club, through its Stock Updates and Stock Alert, advises its members whether it’s buying/selling time for some of the club’s stock picks, and that’s the only time I log-in to my trading account and put that buy/sell order.  Its team also does the analysis and gives an already screened list of stocks and limit prices for buy below price and target price.

With this set-up, I just keep buying the selected stocks while it’s still at the buy below price and sells once they reach their target prices (or near them). All these reports and updates are sent to my email which makes me updated at all times.  If there's any change or sudden news, the club will also take care of that.

By the way, Truly Rich Club primarily uses Fundamental Analysis with some sort of timing. If you're the lazy member, you can go straight to the SAM table that summarizes the stock picks and do your monthly routine. Below is a sample of that easy-to-follow table.

Truly Rich Club's SAM (Strategic Averaging Method) Table

If you're the more curious type, you can digest the explanation of the picks at the second part of the report.  For example, in the last Stock Update sent, Mike Vinas talks about some of its Stock Picks' performance. So whatever investor you'd want  to be, the club is surely a big help.

Focus on your cashflow

As a last advice, do not to focus too much on your stocks but keep an eye more on your cash flow. Find ways on how you can earn more and multiply your streams of income and put a portion of that increase back into your investments. This will maximize the power of compounding in your wealth building.

Start by thinking what you have now that you can offer to the world. Think of your talents and gifts. They can be your natural and automatic way of becoming wealthy!

Have fun investing (with less to-dos),

Omeng

PS: For beginners, download you perfect starter -My Maid Invests in the Stock Market ,  and start your journey to your millions.

Sweet Rewards of Delaying Gratification

Lots of advices have been said about the importance of delaying gratification especially in handling our own finances. While this is true, I believe that this principle is not entirely new to us. In fact, I think this is inherent within us.

In my own experience, while I'd definitely want to enjoy the present, I'd  naturally choose and yearn more to enjoy the last stages down the road. For me, it's simply illogical to enjoy now knowing I'd suffer later on. I'd rather do the opposite and delay gratification now and have the enjoyment in its fullest sense at the end. The gospel yesterday seems to have something related to say:

Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion?  Otherwise, after laying the foundation and finding himself unable to finish the work the onlookers should laugh at him and say, ‘This one began to build but did not have the resources to finish.’ (Luke 14: 28-30).

I remember one time when I celebrated my birthday with some officemates. We've decided to celebrate it at Vikings( whow bigtime!)  We've two options: to do the lunch-out during (an extended) office lunchtime or do it after office time and have a dinner buffet instead. And I recall naturally pushing for the second choice for the main reason that it simply didn't appeal to me to enjoy the buffet when I knew I'd go back to my desk and finish a job. I'd rather finish the job and have the celebration later on (without thinking when it should end) then go straight home  for a good rest.

Investing is actually a concrete example of delaying gratification. While we can readily spend the money we have now and experience the joy it brings, we're delaying that experience to have a much better version of it in the future (hopefully giving it a better meaning and fulfillment for us).

Below is another excerpt from Truly Rich Club's Wealth Strategy acticle  discussing another good point about this value. For those thinking to buy your own house someday (I do!), let this help you see that decision more objectively.

Photo credit: Investing is actually a concrete example of delaying gratification.

***

The Price of Delaying Gratification (Lyndon Malanog)

When my wife and I started our life together, our first goal was to have our very own house to raise our family. In our culture, having your very own house is a major dream of every young couple.

For many of us, a house is not just an investment but a symbol of success and security. But in reality, a new house is only a facility for you to be tied up with a 20-year loan. And because the title of the house is still with the bank, SSS, or Pag-ibig, this only means that you are actually staying in a house you never own for 15 or 20 years. On the other hand, your house depreciates in value and only the lot where your house is located is actually appreciating. In short, unless your house is rented and is putting money into your pocket more than what you are paying the bank monthly, then it is not an asset but a liability.

The bigger the house, the bigger the need for maintenance.

Now let me share to you my first real estate venture.

Getting a Loan for a House

Last 1994, right after our wedding, we decided to buy our own home. It’s a simple home built on a 240-square-meter lot in the area of Rizal with a total price of P300,000. One hundred fifty thousand pesos was the amount that we needed to pay in cash to the first owner and the remaining half will be an assumed SSS Housing Loan.

The P150,000 SSS Housing loan was to be payable in 15 years at a fixed monthly amortization of P3,800 per month. To stress the point, this means that the original amount that I owed SSS was only P150,000.

Let’s do some simple math:

P3,800/month x 12 months/year x 15 years = P684,000

Which means that I am paying 4.5 times the original amount that I owe from SSS.

Here’s the surprising thing: If we opted to start our life together by renting a house and invested our cash out money of P150,000 in an equity fund for 15 years, then today I could have an amount close to P5 million. This means that our money could have grown 32 times vs. my debt, which have also grown 4.8 times. With P5 million, I could have bought an upscale house and lot in an exclusive subdivision plus some extra cash to fund my business plans.

Now or Wait a Bit?

Now you decide if it pays to wait and delay gratification. Don’t make the same mistakes I did. This is the very common problem of people today. “We want something fast and soon” and that’s why we result in debt.

We are living in a culture of consumerism. We earn then we spend. This is a cycle that goes on and on until a person realizes that he will be retiring very soon without a sufficient savings, because all his savings is used up to pay the monthly amortization in the bank.

Make time to learn by reading books and attending seminars. It’s your greatest leverage during this Information Age.

See you very soon and God bless you abundantly.

 ***

Have fun investing (for a better and greater joy),

Omeng

PS: The above piece is a short section of a sample Wealth Strategy article of Truly Rich Club from Lyndon Malanog. 

Lyndon Malanog is an Entrepreneur and the Financial Coach of Bo Sanchez, Inc.. He continuously gives “Financial Discipline and Wealth Management” seminars to companies and groups as part of his noble mission and advocacy of educating people. 

Meet Lyndon (and other great speakers Randell Tiongson and Marvin Germo) in person in our Philippine Stock Market Premier Seminar this coming January 25 at Gateway, Cubao! Know how to avoid many mistakes people commit in their financial lives and learn how to have winning investments in the stock market!

Get more details here.
Discounted rate of 2497  1497 ends this January 9  so reserve your slot now. 

Email pinoyinvesting@gmail.com to reserve your seat now.

I entered the market close to the peak in May this year. What would you suggest as a strategy?

Just sharing quick note from COL Financial Mid year market briefing answering the most relevant questions that you may also have now (especially to those who started in the last few months when the market was at its high. Basically the message is that PSE will recover but may experience more correction along the road.  Either way you must have a plan in place that will guide your future actions.

Happy reading!

***

I entered the market close to the peak in May this year. What would you suggest as a strategy? Should I still sell now or hold on to my position?   

It really depends on your investment time horizon and on the size of the portfolio that you currently have. If you are a long term investor and the amount of money that you have invested is something that you do not need in the short term, then you can just hold on to your position. Although it might take a while, we remain confident that the market will eventually recover and reach new highs. If you are a long term investor but are heavily invested, you may want to consider reducing your size. The volatility of the market in the next few months might be too difficult for you to bear if your size is too big.  If you are a short term investor, it might be a good idea to sell your positions now as the market is still expected to undergo a correction (please review our technical analysis presentation to understand our short term view of the market). Aside from cutting your losses, selling your position now would provide you with emotional and psychological benefits. It might be difficult for you to mentally prepare for the market’s eventual recovery if you are sitting at a huge loss

***

Have fun investing ( knowing what to do!),

Omeng

PS:
Learn Fundamental Analysis and know how to pick your winning stocks in a a full-blast seminar with Pesos & Sense' host Aya Laraya this coming Setyembre 28! 
Early bird discount ends today so reserve your seat now.

Learn too the money secrets and principles in how to make it work harder for you!

Best of all, you'll be able to draft your own financial plan (thus keeping you always on track)!

Get details here!

Early bird discount ends today na so reserve your seat now.

Get more details and bonuses here!

Does Peso-Cost Averaging Really Work?

Below is an article taken from Insular Life giving some useful insights about Peso-Cost Averaging [Related articles here : The Easy Way of Investing & How to earn even with falling stocks??!]

This is still part of the series giving you several strategies that have been established throughout the  history.

As you've probably (and yo should've) realized by now, there should be no strategy good for everyone as each person has different personality, and thus plans and time-horizon. It's basically pointless to ask and seek an advice from someone who's trading short-term if in the first you're banking long-term. I urge you to try out each of this strategy yourself and find one that works for you and for your goals. 

Speaking of ehem, ehem, goals:

"Mag iinvest ako para sa education ng anak ko"

Biglang bumagsak ang market, nagreredeem na ng pera. 

Bakit? mag eenroll na anak mo?"

-Rex Mendoza

Set your goals & invest according to it. This will save you from much headaches (and give you time to increase your cashflow instead!)

Happy Investing!

***
Does Peso-Cost Averaging Really Work? By Efren Ll. Cruz,

A lot of people are being enticed to invest directly in the stock market especially now that the Philippine Stock Exchange Composite Index (PSEi) has reached unchartered territory.  And with the economy also posting significant gains, it seems that that PSEi is still headed for the stars.

A school of thought, however, proposes that while investing in the stock market is far superior over the long-run than investing in fixed income instruments, it would be advisable to just invest a fixed amount periodically.  This is called Peso-cost averaging (PCA), with the currency changing depending on what you are investing in (i.e. the strategy becomes Dollar-cost averaging if you invest in Dollar denominated instruments).

To see if PCA really works, let’s apply backtesting using the historical data on the PSEi.  Based on the research of my company, the Personal Finance Advisers Philippines Corporation (PFA), investing in the PSEi would have produced the following returns:

 Source: Philippine Stock Exchange

             *assumes investment of Php100,000 at the end of each year

             **up to November 29, 2012

You may be tempted to say that investing one time reaps the most rewards as shown in the simple average column.  But simple average is deceiving in that it assumes that all the money you can and need to invest will be invested at one time.

Not very many people have the capacity to invest all they need to in one go.  Moreover, investing all at once ignores the risk in not diversifying through time.  No stock market moves in an upward straight line.  This is because, as Jesse Livermore (the world’s greatest stock trader) once pointed out,

“Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.”

Livermore said that the FGHIs of investing, (i.e. fear, greed, hope and ignorance) periodically pull down the markets.  The pull can be gentle like in a price correction or be a violent tug like in a stock market crash.  History is replete with evidence of crashes from the Tulip and Bulb craze in 1634 to the Great Depression in 1929, to the Asian Financial Crisis in 1989, to the Dotcom Bubble in 2000 , and to the Global Financial Crisis in 2008.

Will there be financial crises again in the future? Most definitely!  Ignoring this predisposition of markets foregoes opportunities in investing at cheaper levels, as what always happens during crises.

Another deceiving thing with simple interest is that it does not give the effective return. The annual compounded return is the better measure of effective return.  And as can be seen from the previous table, investing over the long-term, especially over 25 years may not seem all that great.

So if most cannot invest all they need to invest in one go and, even if they did, would be foregoing valuable opportunities to buy cheaper, what should be the strategy?  The better way is to do PCA of index component stocks.  And as shown in the earlier table, PCA investing, with the exception of the 1-year measure, outperforms one-time investing in all other measures.

The other advantage with PCA is that excessive stress from investing is avoided through automatic investing rather than in timing the market.  Excessive stress is one of the major causes of heart disease and no amount of money is worth chasing after if it comes at the price of high stress levels.  Believe you me, my kidney function was cut in half during the Asian financial crisis when I was still managing funds.

So doing PCA on index component stocks works. And if you don’t have even the time to invest under this strategy, because of the details of having to rebalance your portfolio to match that of the PSEi, simply invest in stock index funds.

Want the stress-free way to financial freedom. Do PCA.

 ***

As the old cliche goes, Plan your trade and trade your plan.
PLAN to be a long-term investor; don't become one dahil nalaglag hawak mo.

Have fun investing (stress-free!),
Omeng

 

PS: In strategies like PCA, choosing the right stocks is more important than timing the market.
Learn Fundamental Analysis and know how to pick your winning stocks in a a full-blast seminar with Pesos & Sense' host Aya Laraya this coming Setyembre 28!
Early bird discount ends tomorrow so reserve your seat now.

Learn too the money secrets and principles in how to make it work harder for you!

Best of all, you'll be able to draft your own financial plan (thus keeping you always on track)!

Get details here!

Early bird discount ends tomorrow na so reserve your seat now.

Get more details and bonuses here!