June 25, 2012- The Best Unkept Secrets in Making Money in the Markets

Okay,  last Saturday, our team went to explain the stock markets to people who have never invested a single stock in their life.  In short, people entirely new with zero knowledge in the markets.  So we came up with lots of slides to explain the markets to peeps.

I cannot copy paste the entire slideshow (coz it’s proprietary – owned by company, not me).  Nevertheless, I can share the basic concepts here.

(If you want the complete copy – just message me via facelesstrader@gmail.com and I’ll share. thanks.  We’ve put in lots of cute pictures especially for newbies and promise– we don’t talk about technicals because we assume ZERO knowledge.  The talk went great.  Feedback from the people who listened to us said, they understood it well, so for my clients, I can just simply explain the entire presentations to you if you want to.) 

For me — the following will have to be my favorite best lines in explaining how to make money in the markets (the stress free way).

1.) For as low as Php5,000, any Filipino or foreigner can easily invest with the country’s top fund manager in the Philippines.  http://www.philequity.net

For more information, call the phone number in the website.  Email me or just simply make a comment, and I’ll try to help design a solution based on your personal needs.

The main difference between a mutual fund and a unit investment trust fund (UITF) is that mutual funds’ maximum exposure in a stock is 10% of the fund, versus UITF’s 20% allocation per stock. Also, they have different governing bodies.  The first is SEC, the second is the BSP (Bangko Sentral ng Pilipinas).    You also need to check for the fee differences because they vary.  Nevertheless, Philequity fund has provided the Php1.00 invested since 1993 to Php25.00 so far for 2012.  That’s 20 years of SUPERB investing, I must say.  While historical performance is not a guarantee of the future, just know that it’s been done for 20 years and that’s magnificently not just luck.

2.) Peso Cost Averaging – while heavily known by most people – is still not as used by many.

– Remember this – Time in the markets is generally more important than market timing.

Most people hone their technicals, and fundamentals but sometimes you’ve come so far with those two but forget discipline.  The timeless value of Peso cost averaging is discipline.  Crucial factors of Peso cost averaging is amount, time and company.  Peso cost averaging works in stagnant and rising markets (which we are experiencing now), but NOT in perennial declining markets.  Know the difference.  If you think you are good with timing the markets, then so be it.  However, what I’ve realized is… market timing alone is so difficult that 1% of the population can only rely on consistency in complete market timing.  Spend time with your kids, choose the companies with good earnings and good business models, allot a set amount of disposable income for investment and just do peso cost averaging (or find a broker who’ll assist you somehow).

I believe COL Financials’ EIP program talks heavily about this.  Mr. Bo Sanchez wrote a book “The Turtle Beats the Hare” or something alluding to the merits of long haul investing.  I suggest people read the book.

Also, Mr. Aya Laraya of Pesos and Sense TV has been talking about this, but I don’t know if people actually listen.

Anyway, the people who did Peso cost averaging for BPI and JFC for the past 10 and 9.5 years (allotting 5000 pesos a week) grew their invested capital by 269% and 232% respectively after reinvesting all the cash divs and stock divs in the same investments.  (You can ask the excel file from me if you want to know how I computed it.  Message me lang.  I dont know how to attach excel file here)  Apple Stock was superb for the last decade. 5000 bucks invested in Apple returned from 2.5 M to 52M end of 10 years.

It doesn’t take a genius to make money in the markets, it just simply takes discipline and time.  Forget about the people fooling you into quick riches, and just stick to having a trading account, an investing account (via peso cost averaging).

Let these pictures help instill the importance of long haul investing:

3.) Last thing to note, don’t let people tempt you in buying “race car” stocks.  Just like the normal people driving cars, leave the speculative stocks to professionals.  You’ll end up crashing and burning especially if you don’t know what you’re doing.  Don’t listen to people buying stocks that go up 200% within 5 days.  Stop minding them.  If you think they’re all noise, completely ignore them.  Far more money is lost chasing conceptual dream stocks rather than the “turtles” that eventually just make so much money for you over the long run.  You don’t have to make money in these stocks.  You can buy a little if you wanted to before, but make sure you had a position size.  Never mind hindsight.  That’s the thing, it’s all just hindsight.

Listen to the people who’ve been making money year in year out.  They all said the same thing – Discipline.  Finding your investment style.  Peso cost averaging – stress free- for most people.

For “advanced” market peeps, you can all just simply modify peso cost averaging.  Trust me, I sold my favorite stock because of macro concerns and saw it go uppity uppity up.  Peso cost averaging eliminates the fear of missing out.  Once you find the companies you want to do long haul investing, stick to the plan.  Thanks.

*****

I said above are the best unkept secrets because they never were meant to be secrets.  They’re always out in the open, but people for some reason refuse to listen and simply listen to tips, most often from unscrupulous quick scam artists even.

If you want to do cost averaging, invest in mutual funds or ask someone about it,

 

– Faceless Trader