A once in a lifetime (investing) opportunity

To make money in the stock market, you need to buy low and sell high. But in recent weeks, the market has been bearish. As always, many people came out expressing their sentiments such as blaming the government for this and that.

The sell-off during the last two weeks was not caused by any fundamental developments locally but due to external factors which also affected other emerging markets. But one of the primary causes is the on-going and trade tension between the US and China.

However, the intensifying trade tension between the US and China should have a minimal impact on the Philippines as we are less dependent on exports compared to most emerging market economies. Unfortunately, the Philippines is part of the emerging market basket, making us vulnerable every time investors reduce their exposure (foreign fund outflows) to these markets.

I believe the Philippines is on the right track as our central bank is managing its economy in the right way. We have a “solid” foreign exchange reserves, strong banking system, fiscal position and overall fundamentals.

Nobody knows when the stock market will recover. And while stocks are already cheap, nobody knows when and where they will bottom. But, for the lazy and rational investor, now is the time to accumulate stocks.

What can investors do?

• Use investment money only – Investors should only use money set aside for investments (do not touch your budget for living expenses). This is to avoid the possibility of being forced to sell stock positions at a loss because of your short-term fund requirements.

• Raise more money – Now is the time to find more money & accumulate a cash position. Having a cash position will enable you to take advantage of opportunities such as undervalued stocks and average down on current positions to name a few.

• Mind your emotions – It’s normal to be excited when seeing bargains, but don’t get carried away. Limiting your exposure to a manageable size also helps you stay objective and rational even if the market continues to weaken.

• Buy slow, strategically – Buy slowly to take advantage of any further drops to reduce average purchase price. Also, use peso cost averaging strategy and buy stocks weekly instead of lump sum or buying stocks all at once. Don’t forget to diversify. Stocks recover unevenly and you don’t want the performance of your whole portfolio to suffer due to some bad stock picks.

At this point, the PSE index maybe around less than 7,000 level from a high of 9,000. This is a great opportunity to open a stock market trading/pooled-fund investing account. For the already invested, it could even be an opportunity of a lifetime.

Sooner or later, the PSE index will find and hit its bottom and will go back up soon. It will open wonderful opportunities. Although market conditions are scary, experience has taught me that it pays to be bullish and stay invested during tough times.

“The same wind blows on us all; the winds of disaster, opportunity and change. Therefore, it is not the blowing of the wind, but the setting of the sails that will determine our direction in life.” – Jim Rohn

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Vernon Joseph Go is an RFP®–Registered Financial Planner | Licensed Real Estate Broker | Content Creator | Podcast-on-the-go Producer & Host