You Asked, I Replied: Which Is The Better Option, Peso Cost Averaging Or One-Time Investment Of A Large Amount?
Good evening Sir Mark. If you will allow me, I just want to ask your honest opinion. Which is the better option? Peso cost averaging or one-time investment of a large amount? Thanks and more power.
Both options are good. But first things first, you should ask this question, "Does it make business sense to buy this stock at this price?"
I would be biased here. For me, you should adapt a Value Investing mindset.
It's not about the option of buying on a monthly basis or doing a one time purchase. Regardless of what you do whether you cost average or you buy one time, the most important thing to consider is to buy a strong company when it's undervalued.
Warren Buffett's common-sense advice to aspiring investors is to pick stocks that possess a durable competitive advantage and buy it if it's trading at a price below your intrinsic value.
Once you determined a company that possess a durable competitive advantage, how you deploy your capital will also be crucial.
Doing a cost averaging method is a good option because it spreads the risk of volatility. However, buying one-time is also good if you perceive that the price is in it's lowest.
When I invested in MEG, I did a cost averaging method and made 14%.
When I invested in WPI, I did a one-time buy since I believed that I'm really getting a bargain at almost 70% to 75% margin of safety. I made around 30% from that trade.
Right now, I'm in the process of accumulating as much FB as possible because I believe the stock is undervalued and has a very huge upside potential in these coming months. I'm buying on a set price I think that makes sense. I do a strategic method of buying using monthly pivot points.
Inside the Truly Rich Club, members implement the Strategic Averaging Method (SAM). It's a system where you only buy at a specified 'buy below price'.
So you see, It's not about which is a better buying method. The point is, you should be buying strong companies at a cheap price regardless of what your buying strategy is.
All the best!
Disclosure: I already sold MEG and WPI at a gain and do not intend to buy in the next 24 hours. I'm currently holding FB and I intend to purchase more shares in the next couple of months at a price I'm comfortable with.