Long-term Stock Investing Is Boring… Or, Is it?

Stock Market Investment and Trade Strategies - JayceeDeGuzman.com

I sent this newsletter to my clients in September 2015. I wrote this newsletter for my clients who do long-term position investing (those who are investing in stocks that are in the Investment Guide table). PSEi closed at 6890.94 last September 30, 2015.  As of the time of writing this article, PSEi is at 7849.83.

The events I mentioned to my clients in this newsletter may not be happening today anymore. But I want you to focus on my message for long-term position investors like you (if you’re one). I think this sharing is so timely, especially that PSEi has dropped by nearly 300 points from its all-time high of 8100/sh.

Long-term stock investing is boring! Boring! Boring! Boring!

That’s what people say when they do it in the wrong way.

How can it be boring when you know you have to log out from your online stock portfolio because you have a job or a business to attend to? People who say that long-term investing is boring are those who claim to be long-term investors but they set unrealistic expectations. Some expect that long-term investing means “12 months”. Some expect that long-term investing is buying on the first month and seeing a guaranteed earning on the second month. Some expect that long-term investing is all about seeing green numbers in their portfolio.

Seeing immediate earnings through long-term investing does not always happen. It takes time. False expectations lead to frustrations. Sometimes, the frustrated ones jump into trading even if they lack the skills and discipline of a seasoned trader. Eventually, they lose a bigger amount of money. Then, they quit and say, “This stock market is like gambling. I don’t recommend this.” This scenario goes on and on for decades.

The good news is we (Stock Signals Philippines clients) don’t have to continue that cycle.

That means we will keep on buying a stock with good businesses and leaders, especially while it’s cheap. Before it goes up, we’ve already accumulated a big volume of shares while it was dirt cheap. That’s the beauty of being a long-term position investor. You buy when it’s cheap, and not when it’s near its over-priced position.

Nothing is significantly wrong as far as the business operations of the stocks in the Investment Guide table are concerned. But because of on-going global economic issues and discussions, the Philippine stock market is affected.

There’s this economic issue in China. There’s this uncertainty as to when will the Federal Reserve raise interest rates. The Philippine Peso weakens against the US dollar. All of these combined together to affect the local stock market.

Because of these issues, foreign investors are shifting their funds to markets operating in US dollar. Why? Of course, the value of their money won’t be lessened by currency exchange rates. If they’ll bring their US dollar in the Philippine stock market, they’ll have to go through currency exchange (USD to PHP) so they can buy our stocks. Since PHP is weak and USD is strong, their buying power is lessened. Between the USD-to-PHP ratio of 1:42 and 1:46, where will you get the most value from your dollars? It’s from the 1:46 ratio, of course. The weaker the PHP gets against the USD, the lesser value you’ll get from your PHP when you exchange it to USD from PHP.

Foreign investors also hold the stocks in our Investment Guide table. The Philippine stock market is significantly influenced by foreign investors. Forty to fifty (sometimes sixty) percent of daily trades are from foreign investors. Imagine how anemic each day would be without a single foreign investor in the Philippine stock market. Do you now understand why global issues affect the stocks in our Investment Guide table?

READ: Why You Should Check the Foreign Fund Flows of a Stock

Since we’re long-term position investors, we translate what’s happening as an opportunity to accumulate more shares at a cheaper price.

I know there are many distractions, especially if you’re going to digest the opinion and insight of other people from social media. If their insight and opinion differ from what we have, it’s okay. Why? Because the Stock Signals Philippines has its own principle of investing.

Remember, any investor, whether skilled or not, may have a different strategy because people have their own time horizon, financial goals, and discipline in investing. As for me, I don’t mind even if it takes 5 or more years of the accumulation period. Not that I’m saying it’ll certainly happen, but I’m just re-emphasizing my commitment to our long-term investing discipline in the Stock Signals Philippines.

I am hoping that you are not expecting to make a ton of money by following a long-term position investing strategy in a short period of time. Our long-term stock portfolios are affected by the outflow of foreign funds, too. Since I know that the main reasons for the outflow of foreign funds are the economic issues in China and in the US, I remain in a buying mode on my personal stock picks. The companies we buy are not losing their businesses, after all.

There are only 3 reasons why I should stop buying my personal stock picks.

  1. when my personal rating is set to HOLD
  2. when my personal rating is set to SELL
  3. when the price decline is caused by a transition from good to bad business management and the lack of sound plans to pump earnings up

PSEi has a negative year-to-date gain. Perhaps, we already know that PSEi is composed of 30 biggest publicly-listed companies in the Philippines put together in one basket. Having a YTD loss does not make them spoiled eggs, however.

It’s the election year next year in the Philippines and in the US. It looks like waves won’t calm down until after the election period. I have a hunch that the Federal Reserve’s wishy-washy stance on raising interest rates has something to do with politics.

I think the next question would be this, “Jaycee, if you have a hunch that things would only calm down next year, why don’t we pause from doing anything until next year?”

That is a valid question if, and only, we’re trading, but we are not. We are investing as far as the stocks in the Investment Guide table are concerned.

When I trade, that’s when I am obsessive-compulsive with the intraday, short- and mid-term price fluctuations of a stock. But since we’re long-term position investors, we don’t want to stress ourselves with too much speculation. It doesn’t mean we’re not going to exert an effort in, at least, buying at the cheapest possible price point, however. That’s the reason why the system auto-calculates the best buying range every 30 to 60 minutes, with respect to the stock’s intraday price movement.

I understand and know how you feel right now because that’s what I felt when I was still in the process of cementing my principle in investing. A long time ago, it was difficult for me to find the sense in buying a good stock with a price that was going down. But I asked myself, “Where am I really investing? Do I only consider the stock’s price movement without any regard to its future value? Should I continue buying this stock because I put more weight on the company’s long-term value?”

Again, as far as the stocks in our Investment Guide table are concerned, we buy a stock because of its long-term value. In long-term position investing, we snub short-term price fluctuation caused by external, domestic or international, economic events.

If we were to factor out all these external events affecting the Philippine stock market, we would see a green PSEi. I really believe that the Philippine stock market is just enjoying the moment as it continues to build a strong upward momentum towards 2016.

I admit that it creates a happy feeling seeing a green portfolio. But wouldn’t you have been happier had you been able to accumulate more shares, at a cheaper rate, before your portfolio turned green?

The last thing I don’t want you to do by the time your long-term stock portfolio becomes green is snapping your fingers and saying, “I should have bought more when my stocks were cheaper. What was I thinking?”

Jaycee De Guzman

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