Yesterday, I threw a question at you on whether it’s better to time the Philippine market or hold on to investments for the long haul. To me, the significance of this question is magnified by the inefficiencies in our local stock market and the investment environment. I wondered whether Philippine-centric issues such as market inefficiencies make the Warren Buffet-style investing ineffective here.
Thank you for your replies.
Read what the experts say:
Ramon del Rosario, Jr.
President & CEO, PHINMA
People have been known to be successful with both approaches, but timing the market is a much riskier approach. When you choose that approach, you better know what you are doing. You need to constantly watch the market. You can also play the market by allowing professionals to do it for you.
Mark Yu
President, CFA Society of the Philippines
There are two things: strategic and tactical. Tactical refers to the yearly changes that you do with your portfolio. If you are churning your portfolio a lot, definitely you are going to do worse than the market. There’s a very high degree of probability. If you are churning it in a year’s time, if you are selling at a short-term peak, you will lose money. But from a macro scale, you can definitely make money by reallocating the portfolio (periodically) than just leaving it there.
From a macro perspective, generally if interest rates are high, the stock market does poorly. When interest rates are low, that means there’s a lot of money in the stock market. When you see the government start raising interest rates, then you start reallocating. Maybe you should start selling some of your stocks. When you know its going high already, you may want to be overweight on bonds (again depending on what stage you are). Generally, when interest rates start going down, bond prices start going up, then you make more money.
Fernando Jose Sison III
President, BPI Asset Management Inc.
It depends on the investor. If he doesn’t need the money, he can just leave it there. If you look at PLDT in 2002, the price was just P300 per share. When it tripled to P900, many have taken the profit. Now it’s at P2,700. Those who left the money in the stock earned much, much more. Plus, cash dividends add to the attractiveness of holding on for the long term. It can add to your coffee or dinner budget (smile).
Now, when investing in a mutual fund, people should rely on the skills of the fund manager. Do not try to duplicate or act like a fund manager. If they duplicate or think they can act like a fund manager, then they might as well do the investment themselves. The job of the fund manager is to watch the market and time the market.
September 23rd, 2007 at 3:23 pm
hi gibo, yes you can! There are off-market orders available through an online broker. Meaning, you can log on to your account, post at a price you think is a good entry point, then on the next trading day, if there is a matched order on your price, you get to buy (or sell) that share.
September 21st, 2007 at 3:37 am
i understand the risks in “short-term” stock investing, or in “timing” the market. what is the prospect of say an online stock trader who cant watch the developments during trading hours (because of a day job) and who does his transactions only at night? can it be done successfully? would really appreciate the insights.
September 21st, 2007 at 1:41 am
I think Mr. Yu made a good point, he just strayed a little from the question in the latter part. Think of holding on as the strategy, and the timing as your tactic.
Let’s use Mr. Sison’s example of PLDT as an analogy, and then compare it with BPC.
If you were unlucky enough to buy during the late 90s, you’d probably have purchased the stock at P5-7.00. As the years rolled on, it fell to the Php 0.50 range. This year’s high was about Php 5.50. If you were a buy and hold person, could you have withstood that paper loss?
Now let’s take it a step further, if you bought BPC during 2004, THEN, held on until this year, you would have seen a growth of 1000%!!!
There is no such thing as perfect timing, but I think you can time your entries during the cycles, i.e. in a bull market. Then probably cut down your positions once you know there’s a bear market. That to me, is what strategy and tactic is all about. However, to do that, you should have a basic understanding of chart reading. Else, you’ll be relying heavily on your broker.
September 15th, 2007 at 7:57 pm
dont jump boat… hold on to the investment…. afterall… when we invested… we should have realized at the start it was money we can afford to lose right?
so instead of feeling jittery… forget the investments…concentrate on some other things.. (of course dnt forget to periodically invest still)…..
i dont know where.. but i read somewhere the stock market has given investors an average of 10 to 15% per annum and this already considered its WORST performance through the years…
in my books… that’s pretty OKAY given the less than 1% in savings account hehehe
by the way am into mutual funds and i have weathered the storms for years heheheh and i still came out with a wide grin… *wink*
Ron
September 13th, 2007 at 6:03 am
i agree w/ mr. del rosario; mr. yu didn’t really answer the question; i also agree w/ mr. sison’s 2nd comment.
bottomline: professional money managers are there to help the masses invest their money and hopefully, participate in the progress and opportunities in the local and global economy.
use them. find the best. pay for their services (the lower the better duh!). be diligent in choosing the right manager, the right investment/fund for your particular needs/situation.
for those with the knowledge (or at least for those of us who think we know what we’re doing haha), the resources and the cajones to go at it on their own, the temptation, the challenge and the opportunities of striking it rich on wall street are really just too strong to ignore.