Stock Values Rolled Up

The stock market went up for the third straight day after a seven-day slide in the last two weeks that brought the index to its lowest level since August 2007. Whew!

Last January 25, Friday, share prices closed at 2.9% higher. The market began to recover last January 23, Wednesday, with a 5% increase.

Last week, I observed in the PSE trading floor the uneasiness among the traders, investors and speculators.

The first decline was blamed to the destabilization plots against the government. However, the plunge was worldwide. The fall of the U.S. stock market triggered the frantic selling of shares from all over the world. It was even feared that there will be a possible recession in the U.S. economy. The country was affected since our economy is dependent to the U.S. being one of our strong trading partners.

Last Tuesday, the PSEi hit a cumulative 24.19% decline from its peak. We were in bear market phase.

Our government, however, is confident that we can surpass the possible U.S. recession.

The good news here is the market always bounces back after the meltdown.

An investor friend explained it to me very well before. I want to share it to you.

He said that, “It is a natural law. It bounces back because people and companies eventually find the products and services that will thrive in whatever prevailing circumstances.

No storm, how violent it may be, lasts long. The harsher the storm, the shorter it will be. And if the storm takes you into the deep blue sea, you only get drowned and eaten by the shark if you jump off the boat.”

It may be hard to comprehend ninety percent of the investment jargons. But the winning principle remains: Do not sell when the price is low. Buy shares when the price is low and sell when the price is high.

From the recent book I read, it is stated as: Be the first to buy after the market hit bottom (though I am wondering here how I should know when the unpredictable market already hit bottom). Be the first to sell before the prices decline.

Now, the market is perking up again. The Philippine stock Market is back on the radar screen of foreign investors.

Recently I eyed a certain BPO company in the PSE listing. It just started to open their shares to the public last March 2007, with a good stock value. This is just great!

BPO’s were among the major players in our economy last year. And they are still booming. I am actually planning to start a career in this industry. Or, I may just invest to them. In that way, I can still ride with their success even without groping in the dark.

I am optimistic that 2008 will be another bull market for the Philippines. It may fall sometimes. But it will surely bounce back. It is natural law.


Anonymous said...

You can see the peak and bottom from the graph of the specific stock you are interested in. To pinpoint exactly when it will hit the lowest and highest point is possible only when looking at previous data. In that case, it is useful for analytical purpose only.
For investors, it is more important to know when to buy and when to sell rather than discuss the past. So, it is more practical to look at the bigger picture than the specific points in the graph. To simplify things, note that it is more important to know when to sell rather than when to buy. Even if you bought at a wrong time, you can still invoke the power of time to turn the tide in your favor. Meaning, just wait for the right time until the stock goes up again when you can sell. So, when is the right time to sell? It hinges on your objective. How much profit do you want? The answer to this question is the same answer to "when to sell." If you want 20% profit, you can sell WHEN your stocks have gone up at least 20%. Add some allowance, say 3%, for the cost of selling (stockbroker's commission, etc) so that you can get a net profit of at least 20%. This may happen even during a bear cycle or at the start of a bull cycle. This can happen anytime. So, even if there is still a strong bullish climb, you don't have to wait for the exact peak to sell your stocks. When your stocks have reached your desired profit level, sell! Likewise, even if it is a bear cycle, if your stocks are 20% higher than when you bought them, you can still sell. From a bigger perspective, a bear cycle means a a very, very slow climb with faltering steps or dips but it is still a climb. A bullish cycle means fast climb. Even during the worst drops in the stock markets of the US for instance, was there ever a time when the stock prices have reverted to the previous price for so long? None. There may be drops, but the fall is always significantly shorter than the climb. Overall, it is a climb. It is just a matter of how slow or how fast. Look at this chart: www.usatoday.com/money/markets/2008-01-24-stocks-thur_N.htm

Anonymous said...

Investing in the stock market is one of the fastest vehicle towards financial freedom. Nevertheless, it carries the highest level of risk. The simplest, most effective principle here is: Do not be Greedy. Set a desirable yield and redeem when you already get the projected profit...

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