The effects of crisis and other matters in the stock market

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Ever heard the saying “buy on rumor, sell on news”?

North Korea threats starting panic in the region

source:
http://www.csmonitor.com

That saying has been one of the most quoted when there is a crisis that affects the trend of a stock market. Right now there are two pressing issues happening that might adversely affect the trending Philippine stock market: the North Korea threats and the return of the infamous bird flu.

The return of bird flu pandemic

source: http://economictimes.indiatimes.com

One indication that these two may have already affected the Philippine economy is the value of the peso against the dollar.It was expected that the US dollar will be at 35 pesos this year which is not yet happening one because of some measures made by the Banko Sentral ng Pilipinas to have control of the Philippines’s financial structure. We have seen it in the 40 Pesos/1 US Dollar level for some time but with the latest news and scares by the North Korean threats and the spreading bird flu the Philippine Peso went to the 41 Peso/1 US Dollar recently.

The Philippine peso dipping to 40 to the dollar level

source: http://www.philstar.com

Rumors disrupt the normalcy of any economy or even economies thus it tends to pull down the pace. On this times lots of people don’t know what to do or where to turn to so they go into protective move by placing investments in safer vehicles like gold or bonds of other nation which they think wont be affected with such incidents. Such scenario of course pulls down the general prices of stocks thus forcing holders to sell at low prices because of losing the value of their investment. On the other hand wise investors see this as an opportunity.

With prices dipping to low levels they can accumulate lots of shares of certain string companies. After that they hold on tight to their investments until such confirmed news surfaces. A news is the most concrete thing that can be use as basis. When there is certainty in such news investors who accumulated the stocks has more hope that they will get back their investment thus they keep holding until the right price comes.

But today it has become harder to pinpoint which is news or rumor. We can turn our TV and watch prime time news and see various events of the day. Often times the media over-inflate stories just to get huge viewership. Thus it becomes harder to grasp what is truly news and what is rumor. At times a rumor which has gone so public with the media becomes the news and after several days it turns out to be just a rumor.

At times rumors are use for personal gain. Some companies deliberately create so-called rumors to attract public interest thus hyping their company’s stock price.

As much as possible verify the noise you hear before buying a stock. Always, again I say, always do your due diligence before buying a stock. Don’t let yourself get caught with a frenzy or when you heard that a barber bought a certain stock and made millions in a day because such is just a hype which you might catch or get caught in it and be stuck with a bad investment.


As always the best advice is to trade at your own risk which means to do your homework before buying or selling your stocks. Another good guide to follow is that you should have a good reason why you are buying a stock. Don’t buy because the atmosphere and people are going crazy buying such stock. Buy it because you got good reasons to based your decision.



Financial Freedom Advocate About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

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See all awesome STOCK REPORTS in PinoyInvestor! (size 280x280)

4 comments for “The effects of crisis and other matters in the stock market

  1. April 14, 2013 at 3:36 am

    This post is worth everyone’s attention. When can I find out more? This is a great article. Please visit my site at http://nuboii.blogspot.com

    • April 14, 2013 at 12:30 pm

      Thanks Nubee for the comment. Will be posting some other things but not usually in the same topic but again just like your blog sharing information is something that we should be doing to further our self-development. Again thanks for sharing your thoughts and would to hear from you more.

  2. April 16, 2013 at 9:39 am

    Hi, readers! =)
    You can check Philippine Stock Exchange’s Market Education website: http://www.pseacademy.com.ph to learn more about investing in the Philippine stock market. Thanks!

    • April 16, 2013 at 4:43 pm

      Thanks Chin Chin for joining the advocacy to spread knowledge about investing in our country.

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