What is your stock market-investing strategy? On second thought, don’t answer just yet. Probably the best place to start is portfolio performance.
There are two classes of investors in the stock market—those that are particularly active and those that are not. The first group is like butterflies flitting from flower to flower looking for relatively large short-term moves. This requires close attention to the prices, and stock-market investing is more of an occupation than a passive investment.
The vast majority of investors is not interested in devoting that amount of time and energy and is only looking to having their money work for higher returns than in other investments. Comparing portfolio performance between the two groups is not realistic and offers nothing in terms of determining a good stock-market strategy.
Risk/reward factors and tolerance are entirely different, and the trading psychology is also different.
Then, as a passive investor, what was the return so far in 2017? Are you up 120 percent? How about 70 percent? Have you experienced a 30- percent to 40-percent increase in the value of your stock-market portfolio?
Your first reaction to that question might be that those kinds of return are only for the active traders. You would be wrong.
One place you might want to start is finding out why prices are going higher or why they are not up. Fortunately, there are many experts out there with the answers. In fact, when the stock market is reaching historic highs, the “experts” turn into
“geniuses”. You will read comments like these: “Market sentiment continues to be positively buoyed by the favorable outlook of analysts on the overall market”. “Investors should look at the Philippines’s business model and its economy’s growth prospects”. “The end of the ghost month is adding to positive sentiment”.
But the fact is that all of those high returns mentioned above started at the beginning of the year—not as the “ghost month” ended or “corporate fundamentals” and economic growth kicked in. Annual economic growth dropped to 6.6 percent in first quarter 2017 from 7.1 percent in the last quarter of 2016. You should have bought when the peso was trading at 49 going down to near 52.
Seven of the 30 Philippine Stock Exchange composite index issues are up more than 25 percent in 2017. Megaworld has already gained over 40 percent. International Container Terminals has increased by nearly 50 percent. Ayala Land stock price is up 30 percent. We are not talking about the “high-flyers”. These are the blue chips. On the second tier is EastWest Bank, which has increased by 70 percent. Robinson’s Retail is up 28 percent. And the thing to remember is all of these issues have been climbing consistently through 2017.
So, instead of having to wait for the historic high and the experts to tell you why the market is going higher, all you had to notice was that the composite index was up 5.69 percent at the end of January.
The only stock market-investment strategy that makes sense is simple and smart and probably goes against what you have heard from some experts. Prices go higher when “everybody” is buying. Therefore, follow the crowd to get the best deals, just like you would to the SM three-day sale.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.