A Change in Strategy

The recent slide of the stock market since June, 2013 has probably had made you nervous about your portfolios, and I don't blame you. From a high of 7,403.65, it is now at 6,044.15 or a 22% decline, which is very large.

I know I have been an advocate of Bro. Bo Sanchez's Truly Rich Club, but after having seen my previous gains of 40% drop to 8%, I began to have doubts about TRC's Strategic Averaging Method (SAM), and so I changed my subscription from Gold membership (approximately P500/month) to Silver membership (P247/month). I no longer have access to the mp3 downloads, but I am still earning commissions.

I am not discrediting TRC, in fact, I had learned a lot while I was a member. I learned about making sure to lock-in profits by setting a Buy Below Price (BBP) and that I should sell the stock once it reaches the Target Price (TP) set by Bo. This teaches discipline on setting a price point and when not to chase prices. This also teaches that after a substantial gain, you should already sell the stock and pocket your gains.

I relied on Bo's list of companies to tell me which companies to buy. For some of the stocks on the list, the TP was reached, but for other stocks such as Metrobank (MBT), the TP kept on being changed to higher values. MBT was initially given a TP of 120, then increased to 149. So, the BBP was also changed and increased from 104 (for the 120 TP) to 129.56 (for the 149 TP). I had began buying MBT while it was at the 87 price level, then the TP was increased to 149. So I kept buying while the price was BBP of 129.56.

Suddenly, the market slump of June 23, 2013 arrived and wiped out all my earnings. If I had sold at 120, I would've locked in a gain of 37.9%!

Also, recently, Citiseconline Financial (COL) changed their Investment Guide format. It now includes the Fair Value (thats the TP for us), and the buy below value (thats BBP for us). So the difference now between COL's investment guide and TRC is the list of stocks, right?

But wait, COL also has model portfolio. You can access this by going to the Research Tab -> Fundamentals -> Investment Guide.

Once on the Investment guide, look at the upper right section and click Modify Set-up, then a small window pops up. On the lowest portion of the window, you will see two choices:

1. Use Model Portfolio
2. Use Default Set-up

Click the Use Model Portfolio checkbox then click the Display Investment Guide button. The Investment guide should now be showing lesser stocks. This is the model portfolio of COL which you can follow instead of TRC's portfolio.

I was about to strictly adhere to this model when out of the blue, COL removed BDO and MBT from their list. I thought, "What?!?!? I just bought those 2 stocks a day ago!" They cited that MBT and BDO's long-term prices will be affected due to the recent volatility of the market. The recent majority of MBT and BDO's earnings came from trading gains, i.e. the gains they got from trading the stock market.

And so, I got fed up. I couldn't stand the constant changing.

Now, I still support TRC and I advise that you become a Silver member too. Why? Because of the earning potential. If you click on the link at my blog and become a member, I get a commission without added cost to you. In the same way, if you set up a blog or tell people to join with you as their referrer, you get a commission too. The commission is P99 per month if the person referred joins with a Gold membership. I don't know how much the commission will be for the Silver level.

The topic of this post is A Change in Strategy, and this is like refreshing my entire portfolio. I will shift from SAM/Peso Cost Averaging (PCA) to Value Investing. I'll be teaching you all about value investing in a different post since this is already getting quite long. The link for the value investing lessons is found below.

For you, my friend, if you want to exit from investing in the stock market, my suggestion would be to invest instead in mutual funds or Unit Investment Trust Funds (UITF). A UITF is just like a mutual fund except they are products from banks.

I have come to realize the advantage of using mutual funds or UITFs than investing by yourself through an online broker. They are as follows:

1. Investing through an online broker by yourself means having to monitor the stock prices daily. If the stock market goes down, we tend to panic after seeing all the red in our portfolio, and so we go into herd mentality mode and sell our stocks when it is declining. But when you invest in mutual funds or UITFs, we don't see the price action everyday and so, are immune from market fluctuations infecting our investing decisions.
2. Mutual Fund and UITF managers are under pressure to perform well in the short-term to attract more customers. 

If you have been investing by yourself through an online broker, you'd know what I mean about seeing all red in our portfolio and how we panic after seeing it, unless you have nerves of steel. A downside to investing with mutual funds is that you don't receive the cash dividends declared by listed companies, but if you look at the dividends given out by listed companies, the amounts are so minuscule as to be negligible.

The bulk of money received from the stock market is still through capital gains (you buy at P10, and the price goes up to P15, your capital gain is P5), and with fund managers under pressure to perform well, your portfolio will certainly grow.

The new strategy I am adopting is called Value Investing. The link for it is just below.

Value Investing Part 1: What is Value Investing?

Until then, may God bless your investments.

~Crimson