Weekend Warrior – Money Machine Result as of February 14, 2018
Here’s the result for this week: P1,487,374.27. It’s down a bit from last weekend’s result. Opening an account with BDO Nomura, I submitted a limit order to buy FMETF. Yes, this is for timing the market kung ma-reach ang low price na gusto ko. FMETF is simply another Index Fund mirrored sa PSEI Index.
There are discussions sa isang Investment Group about lump sum and cost average strategy kaya I decided to make a quick comparison.
Now let’s go to our discussion…
Lump sum is when you drop your money once in an investment then forget it. Kung baga, see you in few years, depende sa ilang taon ang gusto mo. The risk of this strategy ay kung bumili ka sa peak ng market, then hindi naka-recover ang market for many years, ganoon din ang investment mo.
There are lots of investors na ganyan ang nangyari. They bought one time during 8,000 of 2015. Pagdating ng 2016, they went nowhere. Pagdating ng 2017, still nowhere. Nang umangat ng kaunti during 2018, they unload their possessions and cursed the market as a no-no investment.
Pero ito ang gusto ko sa aking lump sum. First, I will build my money machine na P20M. Imagine na nabuo ko na ang money machine noong January 1, 2017, pagdating ng December 31, 2017, with 20% growth, I will be enjoying P4M allowance for the whole 2018 na sana. If my lifestyle is only P1M a year, may 4 years akong uubusin ang interest earning ng aking money machine.
That’s the lump sum scenario na aking gustong abutin.
Peso Cost Average
Cost average is a boring strategy to invest, but proven to be effective by John Bogle and Burton Malkiel. Most, if not all, of their investments ay Index Fund – another boring style. Don’t underestimate the power of this strategy dahil napatunayan nila na to build wealth is to set an amount every month and hold it until judgment day, they were able to build billions and trillions sa kanilang managed portfolio.
I follow this boring strategy as a way to build my P20M money machine until 2013. That means I will invest at least P50K every month, in a bet that it will grow 12% compounded annually.
Strategic Averaging Method (SAM) of The True Rich Club
Ito namang ginagawa nilang SAM ay they buy strategically when the market is lower. This requires patience. Kung baga, it’s like an eagle patiently waiting for its prey. These investors want to buy more shares with their set money to invest in a month. Kaya in my example na P50K a month, if the shares fall to their set buying amount, they buy shares. So for this month ay hindi na-trigger ang buy, that P50K will be added to the new P50K for the next month, and keeps on holding until the price reach their buying price.
If you don’t have patience, with SAM you will die waiting kung pataas ng pataas. Baka wala kang entry sa isang taon sa kahihintay. Mangangayayat ka at ng bulsa mo dahil wala kang kita; at mangangayayat ka sa kahihintay sa pagbaba ng market.
Para sa akin ay okay na ang ginagawa kong PCA to reach my goal. But in addition to that, cash accumulation is taking place on the side na gagamiting pang-bottom fishing it the market goes down to good buying opportunity. Kaya ang overall strategy ko ay matatawag kong strategic cost average method (SCAM). Why not? It’s a good name. A simple and boring strategy na may bottom fishing.
At ito pa ang boring talaga. Don’t waste time searching the next big stock in the haystack. Buy the haystack. Kaya gaya ni John Bogle, sa Index Fund lang ako naka-invest. I have only one holding kaya naka-focus lang sa iisang iya-average.
Locking up profits?
Some use this strategy to lock their profits. Pero sa akin, poproblemahin ko na naman kung kailan ako papasok with the same fund. I’m only making my own problem if I do selling to lock up profit, then buy the same thing again. Kaya sa akin, simplify, simplify, simplify – buy, buy and buy.
I consider my saving and investing just like planting trees. Each month is one planting. The more I can plant, the more I will expect to harvest. It’s like the Law of Sowing and Reaping that we can read in the Bible, some seeds reap hundreds, some sixties, some thirties and some did not bear fruits.
Kapag na-reach ko na ang lump sum ng aking dream money machine, then saka ako magla-lock ng profit for my annual budget. Gaya ng nasabi ko sa taas, kung may P20M na ako, with a 10% annual return can support my lifestyle, even without working.
Of course, my dream matters only to me. Yours is the most important para naman sa iyo.
There is enough wealth for every one. So let’s claim what’s ours.
Here’s to your success!