source: http://vi.sualize.us
It has been about two weeks now that the Philippine Stock Exchange is going way down south.
Wherever I go in the online world sentiments of bearish market are seen. Newbies panicking with so many question even to the slightest drop of value in their portfolio(don’t ask mine you might get a heart attack).
There are a couple of things we should understand and accept in regards to this situation. So don’t panic and do whatever is the best we can get from a bear market.
1. The downtrend is mostly effects of external events. If your read news the blame would be the US Federal Reserve’s action, China’s economic situation, and Japan’s story as well.
2. Foreign investors are cashing in their earnings and looking at better opportunities with the news of US economy going back on track.
3. Most investors has been saying that the Philippine Stock Market is too expensive. After saying this for a long while I think they really mean it now.
With all that we could do three things: buy more to average down, cash in your profits if you are still positive, and wait.
Cost Averaging at this bargain times are the best way to really bring down your cost per share. The only problem is when to start buying? Lots of investors like me thought the last week of May was the last but we were wrong. We thought it was time to buy and after buying some considerable number of shares the next week it was a bloody days of sudden drops of the PSEi.
That is why the question that would help you is to know when. I heard the US stock market has turn positive and we are hoping the Dow effect will take effect again.
On the other hand if you are at a profit it would be best to take your profit and reposition yourself to better stocks that are now on bargain. That way when the stock market starts to pick up you too will be riding it.
As for the rest of us like me, we are all in the waiting mode. Let’s not lose our cool and give in to this emotional pressure to sell at a loss. Take some time off monitoring your stock on an hour to hour basis. Check it every three days or every week instead and while doing that engaged yourself into your hobbies like photography or others so that your could take off your mind from the depressing picture of your portfolio.
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. Learn more about Louis and his financial freedom advocacy here.
HAHAHAHA yesterday came as a surprise. I wasn’t really expecting the 5800 to be broken. I was asking myself how long I might wait before I can profit again. And it made me rethink my strategy - my current being to accumulate and accumulate stocks without looking for profit - very conservative. But it turns out that I feel like I’m getting left behind with this strategy. That said, I’m thinking of “trading” blue chips within the buy below of COL. I’m just not sure how feasible that is yet. Hopefully I don’t charge a lot to experience.
At least now, I’m getting used to seeing paper loss - I think if this happened almost a year ago, I would have reacted differently
BTW your blog is really helpful and encouraging to newbies like I am! Thank you!
Thanks Arlet. Before I always say that I am a fundamentalist in regards to stock investment/trading but as time goes(I am about 3 years in the stock market now) that ponit of view kinda change. I need to have a strategy to make the best of the market. Even though in theory I am still a fundamentalist at heart(since I am a CPA
) when things or news seems strange I read charts and try to understand with my limited chart pattern reading knowledge to guide me as I thread the chaotic and risky world of the stock market.
As they say the “The higher the risk, the higher the return” but remember that risk could be manage so why risk so much when you can manage it and profit from it. We all got a long way to learn.
Hmm.. for me it’s a little different.
I started out trying to buy and hold. Then focused on holding dividend paying stocks. then switched to trading based on TA (even though I had very limited TA skills).
Now I’m trying to learn more Fundamental Analysis so i can pick better stocks when the bear market hits.
I guess it’s true that there’s nature and nurture, but it might be adventure that ends up shaping the person.
Yes, the strategy depends on the person. That is why one has to find what works for them.
I’ve seen video of Edward lee interviewed by Bo Sanchez speculating that 2015 is the end of bear market. So how to be sure that my current stocks will survive the market and not ending up selling at lost?
Good morning William. First of all a Blessed New Year to you!
As for your concern first make sure the companies you invested in are in themselves are stable and strong companies that within stand any financial crisis that the stock market may face this 2014 and on 2015. if you will noticed even the great companies were affected by the on-going crisis here and abroad and of course their share price went down. But as long as these companies’s potential are there they will surely get back in due time.
Second is you must know until where can you bear the negative or red marks in your portfolio. If you think you cant go beyond a -10% decrease or Php 10,000.00 loss then you got to let go while they are not there yet. Established your cut loss price so that once it reaches or it gets near that level you can still recover our cost/investment.
Third is to continuously learn and study the stock market and the different stocks available out there. You might find the golden goose or geese and you can sell under-performing stocks and buy such stocks thereby maximizing your money’s worth.
Again A blessed and abundant new year to you and hope that all of us investing in the Philippine Stock market will not only recover our investment but also profit in big time and be better this 2014 and beyond.
May i ask what will happen to the average price of a certain stock if i skip buying or if i bought a share lower or higher than previous price?
Hi there william,
By average you mean your average cost right? if you skip buying of course the average price won’t change but as you compare your stock holding’s average price to the current price there will be changes. Again the principle of Cost Averaging should be taken into account. The lower the buying price of the succeeding stock purchases the lower the average price of your stock holding compared to current market price.
Parang wais na barter yan, if you are able to buy the goods at a lower price and still buy it lower than your previous of course tubo ka pag nabenta mo at a higher price
Hope I enlighten you on the matter william, keep on investing!
Yes, cost averaging. So cost averaging works best during bear market considering there is a bull market soon. But it wont work in bull market. Buy and hold maybe is best. If i skip buying because the price is going up, then buy again when the price falls again, will it pull my average price up? If so, then it will be better to hold that stock until it reaches the target price. I hope my questions make sense and thank you for the advices here.
Yes cost averaging works well on a bear market since stock prices are going down. The purpose of buying more stocks is to lower your average price.
In contrast to a bull market prices keeps going up so there is no point of buying(because it increases your average price) thus buy only when there is a sudden price down during the bull market. That way you are lowering your average price on those moments when prices are rising. With that in mind I guess the best strategy on a bull market is to hold, buy as much as you can when there is a big price dip(of course it is still a bull run), and sell when the price continues to rise up to your target selling price. Because remember if stock prices keeps on rising sooner or later it will go down and when it does it goes down fast because everybody wants to make a profit.
That is where the maxim “tame your greed” came from in the stock market world.