PSEi: 6602.17 pts
Market is Closed

Is it a good time to buy? An opportunity amidst the outbreak


Disclaimer: This is an opinion based on research and personal experience. Please do not follow blindly, and do you own due diligence and research as well.

If you're reading this, I hope you and your family are doing well; please stay healthy. This is a unique time in our history, and a lot of people are affected with the pandemic. Stock markets all over the world are taking a big hit, including here in the Philippines. The question is, is it a good time to buy? If you're exercising healthy investment practices, any time is a good time to buy, however now is especially a very good one because you can buy stocks for significantly less. It's like one of the biggest sale in the last decade; it's similar to what happened back in 2008.

I personally liquidated 80% of my investment portfolio 4th quarter of last year because the local market was already showing signs of stress. But of all the things that could have triggered a potential recession, this was the last thing on my mind. The question is how do we know if we're already at the bottom? Because you might buy a one-time big-time today, only to find out that there's still a big downside tomorrow. As would any experienced investor would tell you, it's difficult to time the market. The short answer is we can't tell if we're already at the bottom. At the time I'm writing this, the Philippine stock market index is at 4,778 points, quite a big downfall from its 8,000+ high.

But as stated previously, we can practice healthy investing. And one of the good practices is to invest consistently. This means, investing on a regular interval, be it monthly, quarterly, semi-annually, etc, depending on your planning. For instance if you invested only one time at the index last month at 7,413, and next month, it goes even further down to 2,000 points, you would have already lost 73% on paper (pre-fees). You might be disheartened and stop investing altogether. But if you started investing regularly on a monthly basis, say for example, 2 months ago, at 7,616 points, then you would have lost 69.7%, which is less than the person who did it one time. And if you continue doing this, you spread the risk and average the cost of what you buy, so even if the market goes down, we are not too worried because we just continue on buying for long term gains. This is called cost-averaging. This is our version of flattening the curve.

But you could argue that if it were the other way around, the person who does a one-time big time buy would have gained a lot more. This is indeed true; that is if you are lucky most of the time. This is the same concept in gambling.

If you haven't started investing yet, this time is already a good time to start (I mean, after the quarantine / lockdown). I encourage you to start investing on a regular basis. Some of you might be thinking, "But how much should I invest?", "What should I buy?", "Where do I even start?", among other things. These topics are for another time. Until then, keep safe, stay healthy, and invest wisely!

by manny 03/21/2020 (Edited)