Wednesday, 10 August 2016

MONEY MATTERS : 3 STOCK INVESTMENT STRATEGIES TO CHOOSE FROM


I was walking along the shops one weekend when I saw a sign saying: MID-SUMMER. Gawk. That means, uhm, winter's coming soon? The daunting realities during winter are a) it gets dark too soon (when I say soon, it's 3 pm-soon!) and b) you are compelled to spend your time indoors. I always believe that there is beauty in every season so I'll try to enjoy the rest of the sunshine and enjoy a new season when it comes. Having said that, I'm excited to set foot on three new countries next week: Austria, Hungary and Slovenia! After this, I may need to stay in one place for a long while because I barely have any leave credits left! :D

Now, let's talk about these investment strategies. Caveat: Note that this won't be uber technical, I just put it the way I understand it to make it easier. We'll skip the jargons as usual.

1. PESO (OR DOLLAR) COST AVERAGING.
One of the most popular strategies in stock market investing. Basically: here's the logic. Day 1 share price is Php 2.00. Day 2, it's Php 3.00. Day 3 it's Php 1.00. If you've bought the same number of shares from Days 1 to 3, the average share price is Php 2.00. Since you don't know the next share price absolutely, you manage the risk by buying with these constants: a) number of shares and b) period when you buy shares.

Personal take: I tried this before but it just didn't work for me. There are studies debunking that this is a safe strategy but for me, it is just too much work and too little result. I tried to subscribe to one of the popular stock subscriptions in the PH but I don't see it's worth it.

2. BUY AND HOLD.
Simplest and low maintenance among the three. You just buy a share of stocks and wait it out when their value hits your target. Usually done for blue-chip companies and when investor's time horizon is medium to long term (i.e. 5 years or more).

Personal take: I opened a second COL account (steps HERE) for this one. I realised that instead of my money resting on a bank somewhere, I'll just use it to invest into something more positive yielding. I make it a point never to withdraw my gains (no matter how tempting it is!) and wait it out until it's full-grown.


3. BUY LOW, SELL HIGH.
Most rewarding strategy but the riskiest too! Having a technical skills related to stock market is definitely a plus but you can use this too even if you're a commoner like me! How does this work? You speculate {aka guess} that this price is the floor price so you buy, and when you feel it's the ceiling price, then you sell. Notice that there's lots of intuition involved so make sure you set a part of your money that you feel you can lose if ever.

Personal take: Not for the faint hearted, that's for sure. I've learned so much whilst doing this and I'll be honest, I've lost money along the way. But if I do the math, it's still a net profit for me. What I like about it is its quick yield turnaround but be aware that higher returns equate to higher risks. Regardless, I think this is my favourite among the three.

I'll try to publish some tips and stock picks in the future. Hope you learned a thing or two or three! (see what I did there? #puns) -CMK



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