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Month: November 2016

Buy And Hold Investing? Never!

In my previous article about buy and hold investing, I promised to give my opinion on when the buy and hold investing strategy works and when it does not work. Should one practice it at all? Mathematically, I think it works as long as you are not leveraged. Being leveraged on your stock purchase means buying stocks on margin. That means borrowing money from your broker to buy more stocks than your money can afford. The most you could lose in owning a stock is what you bought the stock for. Meanwhile the most you can gain is practically unlimited. It could be 10, 20 or 100 times what you bought it for! The risk-reward payoff is significantly in your favor then when you buy and hold. However, I do not think one should buy and hold.  I believe every stock ownership has an “expiration date”. Changes do occur in the company and the economy that changes your opinion on a company. Furthermore, you might want to take advantage of a better opportunity than your current stock holding might offer. One should never own a stock and stop from diligently monitoring the outlook of the company and other alternative investments. Not all stocks obviously have the same holding period. Some have longer periods than others. Technical stocks such as Intel, Microsoft, Google, Apple, etc, usually have shorter holding periods...

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Thinking Of Becoming A Day Trader?

You have probably heard of Day Traders. With online access to their broker accounts, they work in the comforts of their home trading all day. They are called such because most of their positions last only a day, meaning they sell what they buy the same day. Although this is a very risky and stressful endeavor, some do make a living being Day Trader. Some even make a lot of money. To me, however, day trading or very active trading in the Philippine stock market is probably not feasible for the following reasons: Commissions in the Philippines are expensive even when trades are done through the internet. Buying a stock whose value is Php41k will cost you Php127- or .3%. In the US a $4ik trade might cost you less than one tenth of that in the Philippines, or $9.99. It could even be as low as $7.99- or less than .03%. When you are making a trade every day, this difference could add up, and become significant. To maximize the profit from your trades, your positions should be leveraged. By being leveraged your percentage gains or losses from your trades will be much higher than if you just owned stocks outright. Unfortunately, the investment methods used by the people in the US is probably not available in the Philippines. Such methods include buying stocks on margin, put or call options, and...

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Buy And Hold Investing

Sometime ago, I described to a blogger how I took long term investing to a limit- 15 years!  Shortly before the Asian financial crises in 1997, I bought two stocks: DMCI Holdings (DMC) and SM Prime Holdings (SMPH). The timing was bad, because at the height of the financial crises that followed, I was down to 40% of what I invested. However, I held on and did not sell. In fact for the next 15 years, I hardly checked the value of my investment. Early this year, when I checked my statement, I was surprised to find out that my DMC and SMPH investments have turned into serious money. The Php30k DMC stock I bought 15 years ago is now worth Php 2.8 million while my Php38k SMPH stock is now worth Php 2.2 million! Yes, you could indeed make serious money in the stock market! My experience probably suggests most people should forget about short term trading and instead be a “long term” investor, perhaps even be a “buy and hold” investor. Probably true but not always. In my next blog I will describe why and when I think the “buy and hold” approach works, and when it does not work. * This article was originally published on December 29,...

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Do You Want To Own A Company?

Do you constantly dream of owning a company someday, but do not have millions to spend? Do you want to own a company that is growing and sells products that are interesting, or in demand? Do you want to own a company but do not feel you are capable of managing the company, or do not have the time? Do you want to buy the company cheap? Do you want to buy a company that you can unload quickly if you decide you need the money? Do you want to get rich owning the company? If the answers to all the above are YES, then invest in the stock market. By investing in the stock market, you can buy a portion of the company with as little as $1000 or less. You could buy a portion of any company listed in the stock exchange such as Microsoft, Amazon, Facebook, Citicorp, Bank of America, IBM and of course Apple. These is just a sample of companies that not only sell interesting products but products that are in demand and I might say even change the world. Not interested in managing the company, well these companies have seasoned managers in place already with credentials and track record that are hard to beat. Unfortunately, for Apple, you cannot have Steve Jobs working for you anymore but Tim Cook is an able replacement....

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