The Easy Way of Investing in Philippine Stock Market – Peso Cost Averaging for Beginners

Many say that the stock market is dangerous.

And you know what, I agree.

After all, statistics says that an average of more than 80% of all the stock market players lose money.

Geesh..

Mark Twain once said, “October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”

That’s essentially the whole year!

An office mate actually once shared to me his first impression on investing in stocks. He said he couldn’t see the returns being worthy of the time, energy and brain cells being poured into it.

And there’s some truth into that. With the many things that need to be factored in when evaluating entry to and exit from the stock market, it’s really very hard to discern when to start and actually plunge into it.

But the last time I checked, ignorance remains to be not an excuse in trying out something. Most of the times, you only need to know the very basics of anything to make it sense for you.

The Easier Option

History acclaims an established way of investing in the stock market that requires minimal effort. Your fifteen minutes time every month to browse the internet would be enough for this method of investing. That translates to three hours every year – the same amount of time you spend in liking status in facebook a day! :p

It’s called Money Cost Averaging, or in the Philippine context, we say Peso-Cost Averaging.

Peso Cost Averaging (PCA) only means buying stocks of great greatest companies, regularly, little by little, month after month.

The strategy is basically to invest fixed amount of money at regular intervals over a long period in a great company you believe will perform well in the long term.

This is a very passive approach.

Here you’re eyeing for the long run.

You don’t expect big earnings in the near term, but instead a decent profit in the long haul.

If you’re the type of person dreaming for instant money back and returns, sorry, this is not the strategy for you.

But if you are the type who just wanted to make something more meaningful out of your money you won’t need anytime soon, to earn something greater than what Philippine banks normally offer, without breaking your day to day routine, this is the exact method for you.

All you need to do is buy every month of a company which you believe would continue to perform spectacularly in the next 10 to 20 years.

You do it little by little, maybe monthly, not putting all your money in one big shot (lump sum).

You simply invest fixed amount month by month, without worrying about the present market condition.

In other words, you don’t do timing here.

You don’t mind the slips and turns, because you know those are just tiny pixels of the uptrend larger picture you expect in the future.

When will you sell?

Oh, you sell after ten or twenty years or more. Seriously.
In most cases, this will happen come your retirement years.

That’s why you need to select only those companies that you believe would still be consistently earning even after decades. Their solid history and consistent earnings will serve as the safety net surrounding your investments even without your active monitoring.

Personally…

Right now, I have two sets of funds.

One is my investment/retirement fund, and the other my emergency fund.

Emergency fund is a  non-negotiable before you go to investing, and ideally should be worth three to six times of one’s monthly salary.

It’s part of the budget that’s strictly for emergencies, and therefore is saved in short-term liquid investments, making it readily available anytime. Normal ATM accounts can be a place for emergency fund.

What’s the use of emergency fund?

This will serve as your buffer fund. This is important because you don’t want to see yourself dipping into your investments, or worse selling your stocks at a loss, just so you could cover your emergency needs.

Emergency fund also gives you that inner peace knowing that you’re more than ready financially anytime in case these unfortunate events happen unexpectedly.

With this mentioned, it’s also prudent to complete again this emergency fund in case you have used it for your needs.

But if you’re all set with your emergency fund, then you can now start considering starting your regular investments using Peso Cost Averaging technique.

Important Note

Just always bear in mind that Peso Cost Averaging if applied strictly really takes a long time.

For beginners, it’s difficult to develop that patience while seeing your investment going up and down and not minding the fluctuation. The emotions involved often go in the way and can break your investment horizon. If that happens, you step on the border of another strategy called marketing timing, which is a more active approach and therefore requires more resources such as time and skills.

The Four Rules of Making Your Millions in Stock Market

In Bo Sanchez’ book My Maid Invests in the Stock Market, Bo simplified investing, and shares four house rules of making millions in the stock market:
RULE 1: Invest Small Amounts Every Month for 20 Years or More

RULE 2: Invest Even When There’s a Crisis

RULE 3: Invest Only in Giants

RULE 4: Invest in Many Giants

(You can download a free copy of that book here).

Obviously, the rules only make things straight using  the Peso Cost Averaging technique.

COL Financial’s  Easy Investment Program (EIP)

Online brokerage firm COL Financial, formerly Citiseconline, the leading online stockbrokerage firm in the Philippines, has launched its Easy Investment Program (EIP), making it easier for its passive customers to apply the method of Peso-cost-averaging.

Under this program, investors are to put consistently (though not mandatory) fixed amounts every month into solid giant companies with criteria summarized in the acronym GEMSS (Growing Industry / Earnings Visibility / Management Credibility / Superior Products or Services / and a Strong balance sheet). These criteria assure that clients only choose solid fantastic giants and dynamic corporations that compound their expansion over time. COL already provides customers with a list of stocks they can choose from based on the GEMSS criteria.

Since it started last Aug 2008, the EIP list has included only six companies namely ALI – Ayala Land Inc,; BPI – Bank of the Philippine Islands; JFC – Jollibee Foods Corp; MWC – Manila Water Corp; SMPH – SM Prime Holdings and TEL – PLDT.

As of this writing (2011), they expanded their recommendation list to sixteen (16). You can click here for the expanded recommend stock list for EIP or just click the image below. (Make sure to always check their updated list).

 

COL Financial EIP List of recommended companies

UPDATE: Download an updated Recommended Stock List for EIP as of Oct 1 2014 HERE. Make sure to always check the updated list in their website.

How to invest in Philippine stock market for beginners

 

Keep the habit

So you now see the importance of your regular saving habit as your first step in investing.

A portion of your savings, that which you can afford not to use within the next 10-20 years, can leverage on PCA, letting it grow steadily year after year after year.

Invest that small amount regularly every month, and then go back to your normal life.

No need to actively daily watch the market, or hear news about our economy, or be aware of the Wall Street happenings, or bothering with gossips about our bachelor president’s love life.

But take note that you still need to monitor it from time to time,maybe once a month.

Enjoy time with your loved ones instead. Focus on your job or business to increase your cashflow.

Then after ten to twenty years, go back to me.

Subtract from your millions by treating me and my children a Jollibee hamburger!

Take charge of your financial future. Retire a multimillionaire.

Have fun investing!
Omeng 🙂

NOTE: Truly Rich Club, a great learning club started by Bo Sanchez, now employs Strategic Averaging Method or SAM in investing in Philippine stock market.

This works like Peso cost averaging but with some modifications for faster growth and securing profits. This in turn multiplies the earnings nicely.  You can learn more about it in this page. It’s also my personal strategy of choice.

No fear for newbies with peso cost averaging

 

PS: You can also check out Truly Rich Club and see if it will fit your investing needs.
This club gives exact spoon-feed directions specifically when and what stocks to buy and sell.
I’ve been a member of it for years and it has really helped me improve my financial life!

Click here to find more details about it.

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40 thoughts on “The Easy Way of Investing in Philippine Stock Market – Peso Cost Averaging for Beginners

  1. Pingback: How to Invest in Philippine Unit Investment Trust Fund (UITF’s) – Smart Pinoy Investor – Investing and Personal Finance for Pinoys

  2. Maria-Victoria Ll. Llego

    “EIP is where you schedule to buy a particular stock every month, whether high or low, for a certain period of time (e.g. 2 yrs, 5 yrs). This uses Peso-Cost Averaging Method.” This is good news for me because I’d like to buy only AYALA LAND.

    I had already made an initial investment of P5000 to my COL account. Now what?

    1. Omeng Tawid Post author

      Hi Maria Victoria, you can start buying your first stock and start accumulating shares with your strategy, You can adjust strategy down the road.

  3. Richard

    Good day,

    if i use peso cost averaging no matter what is current price of the stock that ill buy, ill just continue to put monthly? on same amount or constant amount? or watch the trend before adding another amount? can you sir guide me.

    Thank you and more power!

    1. Omeng Tawid Post author

      Hello Richard, strictly speaking cost averaging technique does not do timing. but of course you can modify it in any way you wany as you see fitting for you.

  4. Ma.leonora Vega Cagu

    Im interesting this page i heard this before with my friend but im not yet interested before because i join before in some company like mgoldex and unlit now the money we invest not yet return with us so im afraid to happen again

  5. Ray

    Nice Money-cost averaging article! I just remembered a story I heard long ago.

    An old lady’s friend heard a broker say that their fund had 20-30% returns recently, so that friend invested P100,000 in one sitting. They lost P30,000 in a couple of months and had to withdraw the remaining P70,000.

    That’s what happens when you DON’T practice money-cost averaging.

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  10. Leth

    Hi sir, your story inspired me.
    Ask ko lng if ung first amount ininvest pwede hindi muna dagdagan o need talaga monthly or quartely mag add investment?

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  12. adelina vivero

    In applying for a trade account at COL financial one of the requirements is a billing statement but with same surname. My daughter is not yet married and she is living with her supposed to be M-I-L so the billing statement is under another surname since she is using her maiden name. She wants to apply for a trade acct but she can’t submit that billing statement. She has an online job. Please advise.

    Thanks for your reply.

    1. Concerned Citizen

      If she goes to COL office directly, the billing statement is not required. Only the application form and an ID is enough.

  13. Roel Lavina

    good reading for a neweby, im 57 yrs old how can i start in stock trading and looking ahead for my retirement after 8 yrs.

  14. X Box

    Hi, if I were to invest in this passive strategy continuously for 20 years(for example), this means that I actually do not gain an actual income in between those years right? I can only earn money once I sell all those investments I stocked up for 20 years? 🙂

    Thanks, I am thinking of opening an account soonest but I am leaning more on passive investing since I am quite busy with work and I very little knowledge on how this all works. Perhaps in the future, I can learn active trading but for the mean time, I want to start as a passive investor hehe

    1. Omeng Tawid Post author

      @MJ, that is totally dependent on your capacity how much you can invest. the important thing is it has to be same amount and done consistently (monthly or quarterly)

  15. Aurish Presbitero

    hi michelle, you may be interested in investing to Sun Life for protection of your kids we have a lot of programs. call me@ 9257779992 for inquiry. no commitnment maam. =)

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