In a battlefield, one must be prepared, equipped with the right skills, and have a proper plan and tactics before engaging into war because the goal is to win. Same goes with the stock market. Financial freedom is one goal why you invest in stocks. So you must have strategies in order to succeed and achieve whatever you goals are.
The different strategies that I will be talking here are Peso-Cost Averaging, Buy and Hold, and Trading or Speculating. I will discuss each and give some examples that can be easily understood.
Here are the types of investing strategies:
PESO-COST AVERAGING
It is an investment strategy that enables an investor to put money in particular stocks regularly on the same intervals regardless of its price. Let's put it this way, just like saving money, you put a certain amount into your savings account every month. In peso-cost averaging, you invest the same total amount every month.
Let's say for example, you have a salary of ₱15,000/month, and you allocated ₱6,000 and decided to do peso-cost averaging on JFC (Jollibee Foods Corporation). It will look like this:
The total amount invested in JFC is ₱67,308; the total shares acquired is 240 shares; and the average price is 280.41. As of writing this, the price is 316/share (March 28, 2019).
*notes: historical values was obtained from Investagrams' charting tool! Stocks are bought in multiples of 10 because of the PSE board lot rules, which determine the minimum amount of stocks you can purchase. Stock prices are adjusted closing prices from the last trading day of the month. Costs like broker fees, transaction fees, and taxes are not included in this example for the purposes of clarity.
BUY AND HOLD
The different strategies that I will be talking here are Peso-Cost Averaging, Buy and Hold, and Trading or Speculating. I will discuss each and give some examples that can be easily understood.
Here are the types of investing strategies:
PESO-COST AVERAGING
It is an investment strategy that enables an investor to put money in particular stocks regularly on the same intervals regardless of its price. Let's put it this way, just like saving money, you put a certain amount into your savings account every month. In peso-cost averaging, you invest the same total amount every month.
Let's say for example, you have a salary of ₱15,000/month, and you allocated ₱6,000 and decided to do peso-cost averaging on JFC (Jollibee Foods Corporation). It will look like this:
Date
|
JFC Price (PHP)
|
Shares Bought
|
Amount Invested For The Month
|
January 2018
|
284.80
|
20
|
5,696
|
February 2018
|
298.40
|
20
|
5,968
|
March 2018
|
299.00
|
20
|
5,980
|
April 2018
|
285.00
|
20
|
5,700
|
May 2018
|
274.00
|
20
|
5,480
|
June 2018
|
263.00
|
20
|
5,260
|
July 2018
|
270.00
|
20
|
5,400
|
August 2018
|
288.00
|
20
|
5,760
|
September 2018
|
257.00
|
20
|
5,140
|
October 2018
|
276.00
|
20
|
5,520
|
November 2018
|
278.40
|
20
|
5,568
|
December 2018
|
291.80
|
20
|
5,836
|
The total amount invested in JFC is ₱67,308; the total shares acquired is 240 shares; and the average price is 280.41. As of writing this, the price is 316/share (March 28, 2019).
*notes: historical values was obtained from Investagrams' charting tool! Stocks are bought in multiples of 10 because of the PSE board lot rules, which determine the minimum amount of stocks you can purchase. Stock prices are adjusted closing prices from the last trading day of the month. Costs like broker fees, transaction fees, and taxes are not included in this example for the purposes of clarity.
BUY AND HOLD
It is a passive investment strategy where an investor buys stocks and holds them for a long period of time regardless of fluctuations in the market. An investor who uses this kind of strategy look for valuable companies and selects investments that has no concern for the short-term price movements. For ordinary people who has limited funds may not be fit to do this kind of strategy.
For example, you have a ₱200,000 in your savings account and you decided to put 50% (₱100,000) in stocks. I presume that you want to invest on familiar business' names like SMPH (SM Prime Holdings, Inc.) and BDO (BDO Unibank, Inc.) So, you bought 1,200 shares of SMPH at 38.80, and 310 shares of BDO at 160.60 on the first trading day of January 2018. By December, the last trading day of the year 2018, the investment you made in SMPH and BDO are down by -7% and -18%, respectively.
Below is the chart of both stocks from January 2018 to December 2018:
As of now, SMPH is trading at 39.55/share and BDO is trading at 132.60/share. As a long-term investor using buy and hold strategy, despite of the ups and downs, you will still earn through dividends and also you must look at the value of the company, because it has the potential especially when you look into its fundamentals; also its long-term horizon and the future growth of the company.
TRADING/SPECULATING
Since this topic is a very broad, I will make a separate blog for this strategy. So, stay tuned.
Thank you for reading and I hope you learned something. More power and happy investing guys!
For example, you have a ₱200,000 in your savings account and you decided to put 50% (₱100,000) in stocks. I presume that you want to invest on familiar business' names like SMPH (SM Prime Holdings, Inc.) and BDO (BDO Unibank, Inc.) So, you bought 1,200 shares of SMPH at 38.80, and 310 shares of BDO at 160.60 on the first trading day of January 2018. By December, the last trading day of the year 2018, the investment you made in SMPH and BDO are down by -7% and -18%, respectively.
Below is the chart of both stocks from January 2018 to December 2018:
Since this topic is a very broad, I will make a separate blog for this strategy. So, stay tuned.
Thank you for reading and I hope you learned something. More power and happy investing guys!
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