The following are some initial strategies for the stock portfolio simulation:
1. Trade a maximum of one buy-transaction per month.
2. A buy-transaction must not exceed 33,000 Pesos.
Given that the global economy is in a recession, it would be best to be prudent with investments. As such, we should be extra careful in buying companies, or else the stock prices may fall significantly any time and we become stuck with the stock holdings, being unable to liquidate them without realizing large losses.
I am estimating the economic recession or stagnation to last from about two to five years. As it would be unwise to plunge all cash into stocks very quickly, it would likewise be unwise to wait for five years before starting to invest again, as we never know when the next bull run will start all over again in the cycle that is called the economic cycle.
As such, we take a balanced approach by slowly buying into stocks that are undervalued. We spread our investments over a course of about two and a half years. Investing about 30,000 Pesos every month for the next two and half years, would sum up to a total investment of one million pesos, which is the starting cash balance of our stock portfolio.
Going forward into the recession, we will expect stock prices to further drop. We will be able to take advantage of these drops by investing as we go deeper into the recession. But we cannot wait to reach the bottom of the recession, or else we will miss it.
In a way, what we are doing is what is called cost-averaging. That is, the strategy of buying small amounts of stocks at regular intervals in time, in the hope of averaging down the total costs of purchasing these companies. Also, it is a good way to compromise the impossibility of finding the rock bottom of bull market conditions such as today.
Showing posts with label economic recession. Show all posts
Showing posts with label economic recession. Show all posts
Wednesday, January 28, 2009
On why EEI might be a good buy
Not everybody is familiar with the company EEI in the Philippines. Most probably, perhaps maybe just even one out of a hundred Filipinos know that such a company exists. But for a person familiar with stock trading in the Philippines, there's a higher chance that he has heard of this company.
EEI is generally a construction firm based on the Philippines. Though its logo claims that it has been in the construction business since 1931, its name is relatively unknown to the common Filipino perhaps because most construction firms remain largely uncommon to the ear of the average person, regardless of geographical region, at least in comparison to popular names such as McDonald's or WalMart.
So on why I think EEI is a good buy is simple. At least for me, whenever I go to work, I see its name and logo almost at every corner. From my home, I would see its logo at a huge construction going on along Quezon Avenue corner EDSA. From the MRT, I would see the deep escavation and the huge cranes swinging their mighty arms several stories above ground.
Then when I near my office along Shaw Boulevard corner EDSA, I see the same logo again. And with the logo comes some big, big construction going underway, consisting of twin towers. I think these towers belong to the St. Francis Square company. Then when I visit some friends at Fort Bonifacio, there's another huge residential construction going on beside the Serendra condominiums. And you guessed it right, I see the logo again that becomes more and more familiar as the years go by.
Well, one may argue that just because one sees a company's businesses sprouting everywhere in the city, does not mean that the company will automatically be earning big in the near term. Heck, this company has been in the Philippines since 1931. And no one still knows about it.
Think about it. If this company has had a high of about 5.5 Pesos in the past two years, and it is now trading at 0.90 Pesos a share because of the global economic recession which nobody has control of, then give it around two to five years and the chances of it rebounding to its previous highs of five Pesos are quite optimistic.
EEI is generally a construction firm based on the Philippines. Though its logo claims that it has been in the construction business since 1931, its name is relatively unknown to the common Filipino perhaps because most construction firms remain largely uncommon to the ear of the average person, regardless of geographical region, at least in comparison to popular names such as McDonald's or WalMart.
So on why I think EEI is a good buy is simple. At least for me, whenever I go to work, I see its name and logo almost at every corner. From my home, I would see its logo at a huge construction going on along Quezon Avenue corner EDSA. From the MRT, I would see the deep escavation and the huge cranes swinging their mighty arms several stories above ground.
Then when I near my office along Shaw Boulevard corner EDSA, I see the same logo again. And with the logo comes some big, big construction going underway, consisting of twin towers. I think these towers belong to the St. Francis Square company. Then when I visit some friends at Fort Bonifacio, there's another huge residential construction going on beside the Serendra condominiums. And you guessed it right, I see the logo again that becomes more and more familiar as the years go by.
Well, one may argue that just because one sees a company's businesses sprouting everywhere in the city, does not mean that the company will automatically be earning big in the near term. Heck, this company has been in the Philippines since 1931. And no one still knows about it.
Think about it. If this company has had a high of about 5.5 Pesos in the past two years, and it is now trading at 0.90 Pesos a share because of the global economic recession which nobody has control of, then give it around two to five years and the chances of it rebounding to its previous highs of five Pesos are quite optimistic.
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