While checking at my portfolio, the PSEi is down by 1.76% as of market closing. Now, how should a newbie investor handle such market downturn? What does a newbie investor should do?
To answer that question, it all boils down on what kind of investing strategy do you employ. Are you a long-term investor or a short-term trader? For long-term investors, fundamental analysis will give you the answer you’re looking for. If you find the company fundamentals good and you believe that the company can meet its financial goals, then there’s no need to worry of the stock’s price fluctuations. I’ve been holding MEG with an average price of 4.9031 because I believe that the company has good fundamentals. I believe that MEG will not underperform. According to TrulyRichClub, MEG has a buy below price of Php 4.54 and according to my valuation using the Equity-Bond Theory, MEG has a rate of return of 18.12%, thus making it super undervalued.
However, there are times that you need to sell those shares to transfer the equity to other better performing stocks. Doing so will be a better decision but before you do that, make sure that you valuate a company well before transferring your money into that company.
If you’re a short-term trader, you have to be keen on the volume and price trends. Observe the support and resistance levels of the stocks you plan on trading. Do cut loss if you think that the price of the stock will further go down and not recover in the short run.
Being a long-term investor, the best thing to do in my opinion in these cases is to just invest in tranches. The reason is that the Philippine Stock Market these days is resilient. We really don’t know when this market correction will end so to be in the safe spot, we should buy undervalued companies in small tranches in the coming months ahead. When we buy the stock consistently at a lower price, we tend to get a lower average price. If the Stock Market rebounds, then we’ll all be happy at the gains. Also, by buying in small tranches, we become less fearful of the Stock Market’s volatility.
Happy Investing!