There is one popular investment guru and columnist who’s a known hardcore active stock market trader and totally hates the cost-averaging method of investing. One guy posted a comment on the guru’s Twitter account saying that “Cost Averaging” is an effective strategy than having no strategy at all. The popular guru replied, “Doing bad is better than doing nothing at all?”
That’s how he hates “laziness”. That’s how he hates passive investing using the cost averaging method.
Before we talk further about laziness, let us read first the blog post of our fellow personal finance and investment advocate Fitz Villafuerte on How To Do Cost Averaging – Passive Stock Market Investing to understand this strategy further.
Personally, I’ve seen and experienced how effective the cost-averaging strategy is. I don’t need to look into my portfolio every hour or every day. What I do is just save and invest a fixed (small) amount once a month from my salary. I don’t care if the market is up or down. The most important thing is the discipline that I instilled upon myself for this “lazy” monthly habit. You see, it’s okay to be “lazy” as long as you are earning and gaining something out of your laziness.
Some friends who are expert active traders have criticized my strategy and even urged me to study technical analysis of stock market investing and not just rely on passive investing.
First and foremost, I don’t have the luxury of time to learn to “time the market”. Second, I couldn’t even find time to enroll for my distance graduate program! I wanted to study online and become a certified fraud examiner but I couldn’t! I couldn’t even find time to play basketball these days! Do you get me experts? You know why?
Because I’m “lazy”!!!
I only want to spend less than 5 minutes every month just buying my choice of the best companies in the Philippines. I have been doing this successfully for two years and will continue to do so until I reach my retirement age. And when the market is up at the time when I reach 65, that’s the only time I will sell most of my stocks.
It’s not that I don’t want to learn new things. I always want to learn, and I want to learn more. But I also don’t want to risk my family’s future by using the market-timing strategy that even most seasoned investors and traders have used and eventually lost all their money. (Read this: http://wallstreetwarzone.com/the-more-you-trade-the-less-you-earn/)
How will I predict future market price movements? Am I a God? I’m applying the passive way of investing because it’s the safest and surest way to make millions when I get older. With shining bald head and wrinkled face.
It’s way, way better than leaving my money in my savings and time deposit accounts and be beaten up black and blue by inflation and limited insurance.
(Read again Fitz’ How To Do Cost Averaging – Passive Stock Market Investing to know how your Php5,000 worth of stocks a month can make you a multi-millionaire upon your retirement age.)
For now, I would rather spend more time with my wife and child. I don’t want to miss the toddler years of my daughter. I will dance the Gangnam Style with her. I will draw with her. We will play football and wallball in the living room and break more of Mommy’s decors.
I will chat more with my wife about her favorite Koreanovelas and Hallmark movies. We will talk more about food, healthy food that is. We will talk about our dream tapsilogan* business (healthy ba yan???!!!) and how to make that dream come true in the near future. We will talk about the beauty and the promising future of the Philippines. I will fix the good things that I broke. I will write songs for her. And I will make more lovely stories with her until we grow old.
I will sing “Can You Feel The Love Tonight” and the “Grown Up Christmas List” with them and be richer with their love and happiness.
But I’ll leave the Korean songs to both of them.
That’s how “lazy” I am.
*tapsilogan – a restaurant that sells meals with a trio of fried rice, seasoned fried meat, fried egg, with appetizers on the side.
To read more of my stories, subscribe to BurnGutierrez.Com
DONE reading the Cost Averaging! I did not understanding a thing…!!! hahahah…! And since I know nothing about stocks… the way I see it… your investment is more of an inheritance than earning stocks in the end. heheheh… (pakiwari ko lang naman…)
I don’t know how to explain it further. Haha. Bottomline is, you’ll earn more by investing your money in the stock market using the cost averaging method than just keeping your money in your safe for your retirement. Talk about the power of compounded interest. 😀
Isipin mo na lang yung principle na utang ka ng utang every month for the next 20 years at 12% annual interest. Tapos i-doble mo yearly. Sobrang laki ng utang mo nun after 20 years. Ayos. hehe. Ganun din konsepto ng cost averaging/compounded interest. Yun nga lang, earnings ito at hindi utang. Add mo pa yung mga dividends na binibigay ng companies regularly sa shareholders. Ganun kalaki makukuha in the long run.
Eto na lang basahin mo para mas maliwanag hehe: https://www.colfinancial.com/ape/Final2/home/pdfs/2012_eip_primer.pdf
Kung alin naman ‘yung comment kong walang typographical error… ‘yun pa yata dinelete mo!!! heheheh…
Anyway, a quick glance on the “hypothetical” example on the website… looks to me more like an insurance investment thing! heheh… though I’m not that sure… I’ll spend more time reading… Thanks!
Naku, para na din pala akong isa sa mga senador na hindi nagbabasa nang maayos. Hehe.
well…we can call it “insurance” in a way. insured na ang retirement years mo. 🙂
pero don’t forget to be insured separately dahil hindi mapapakinabangan yang kinita sa stock market basta basta pag nag-knock knock knockin on heaven’s door ka na. ganun ka-importante naman ang life insurance. but that’s another story altogether. hehe.
OK. Given the “hypothetical” example…
1. Starting age, 45 years. At P5,000 per month… in 10 years, you invested P600,000.
2. Now, you are 55 years old.
3. From 55 years old, there is a ten (10yrs.) year gap period of… what? Waiting?
4. Ending value at age 65(20years)… P3,000,000 plus.
What is going on between the 10 year gap period between the age of 55 and 65?
What’s happening to your investment in that 10 year gap period?
What do you do within that 10 year gap period? Wait?
What if you need money at age 56? Say… for emergency purpose…!
….and,more what??? Not to mention “how to”…?
Anytime naman you may withdraw your earnings as long as the market is up. Here’s a video from our friend Aya Laraya to simply cost-averaging:
http://youtu.be/XYU4F1Gn5tY
basically, regardless if you put in additional investment from your original amount, it will still accumulate based on the principle of compounded interest. The only “gap” in that 10 year period is that you stopped putting in additional amounts. But your P600,000 continues to double up in interests on an annual basis. Mas malaki nga lang sana if you put in more until you reach 65.
“Anytime naman you may withdraw your earnings as long as the market is up.”
1. At 7% interest rate per year? And when the market is up? And, if it’s not…?
2. It also says… “The longer you hold onto an investment in a quality company, the less chance of experiencing a negative return on your investment.”
2a. Quality company? (beginning year 2012 to 2032… ending value at age 65???)
3. It also says… “….investing your money in solid growing companies…”
3a. Solid growing companies? (beginning year 2012 to 2032… ending value at age 65???)
Maybe I should stop asking to many questions. heheh… May pagka “Manong Insiong” and “Kuya Teddy” din ako(I think…?!) when it comes to arguments…! May pagka “magigil” and “Ala, eh… ka ligalig ga nere…!?” hahahah…
I’ll try to give it more thoughts and considerations. Thanks and Good luck on your investments!
1) If the market is up, then just wait til it shoots up again. 🙂 from my 2 year experience, for example, my Ayala Land Inc (ALI) stocks are continuously within the range of 21 to 36% gain. regardless if the market is up or down. that’s because i continue to buy the stocks every month. mejo malaki na sya kaya kahit bumaba ang presyo sa market, hindi masyado malaki ang effect. again, that’s just based on my experience.
2) That has been answered i guess in number 1. 🙂
3) Solid growing companies are those leading companies in their respective industries. In my case, i am holding on to companies like BPI, Ayala Land, SM Prime Holdings, Megaworld, JG Summit, BDO, Metrobank, First Philippine Holdings, San Miguel Corp., etc. Companies that we believe will last and grow for another century. hehe.
3a) Yes, until you reach 65 or beyond. 🙂
Haha. Don’t worry. We’re in the same boat. Same style. Mana mana lang yan hahaha.