WITH the Philippine Stock Exchange Composite Index (PSEi) having reached its historic daily and weekly closing high once again, it is probably time to talk strategy.
But always remember this: “There are no stock-market geniuses; only bull markets.” In other words, anyone can make money if the market is going up on a longer-term basis.
With PSEi at its high, the question comes down to BTATH (Buying The All-Time High) or BTD (Buying The Dip).
Prices on the stock market never go one direction, as there will always come a time when sellers will come in, even briefly, to dominate trading. Alternatively, buyers will hold back at some point causing prices to fall in the face of normal selling pressure, which never stops. Market action is always dominated by either the sellers or the buyers. But, in fact, buyers control price movement about 90 percent of the time, even on a daily basis. If there are no buyers, prices go down because sellers are always in the market.
Buyers come in and prices go higher, because there is always an unlimited supply of money to buy against a limited amount of stock for sale. Sellers controlled trading in 2013; buyers have controlled the PSE since December 2013.
Now what do we do?
Understand that there is absolutely no such thing as “bargain hunting” buying. Once again, buyers buy a stock for only one reason. They believe the price will be higher in the future. They do not buy because of the current price; they buy because of what they think the future price will be.
If you find a pair of shoes at the department store that is priced cheaper than two weeks ago, it is a “bargain” because it is now less expensive. A stock is not a “bargain” because it is cheaper than before.
In May 2013 San Miguel Corp. shares were at P125. Two weeks later, they were “bargain priced” at P90. Two months later, the shares were even more of a “bargain” at P70. Four months after that, the ultimate bargain price was P55. Sellers dominated the price movement for 10 months, until there were effectively no more shares to sell. Then, in February 2014, small amounts of buying into even smaller amounts of selling pushed the price to P85 within two months.
On the other hand, in July 2011, Universal Robina Corp. (URC) was “too expensive” at P47, having come up from P33 three months before. Since then URC has been “expensive” every New Year’s Day at P53, P87, P118, and in 2015 at P197.
Therefore, BTD on San Miguel wiped out your hard-earned wealth. BTATH on URC made you a fortune.
But, “there are no stock market geniuses; only bull markets;” and we are in a bull market.
The other question is, do I put in a lump sum of investment money or stage my investment over time?
I am a sucker for “buy one, take one” promotions, or at least I used to be. I finally realized that I was usually buying two of what I did not need even one of in the first place. Either, the price before was way too expensive, or this is just a marketing scheme to get the same amount of money and move more merchandise.
Staged buying in a bull market is nothing more than a broker’s marketing scheme. There is nothing wrong with investing every month with new money. That makes sense. But to take your P100,000 and put it in P10,000 at a time over months makes no sense.
Data studies show that the highest return, even when markets go up and down, is better with lump sum investing by a factor of two to one. In a bull market, it is even better for the “lump-summers.”
“But what happens if I put all my money in now and the stock market goes down?” One word: sell.
Decide how much you want to invest. Find and follow the best-stock market trend analysis you can find. Enjoy seeing your wealth grow as the market goes higher, and get out and run for cover if the trend starts going down.
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E-mail to mangun@gmail.com. My website is www.mangunonmarkets.com, and Twitter me @mangunonmarkets. PSE stock market information and technical analysis tools provided by COL Financial Group, Inc.