peso cost averaging

You Asked, I Replied: Which Is The Better Option, Peso Cost Averaging Or One-Time Investment Of A Large Amount?

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stock market investing

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 … Read more

Have You Bought Stocks At The Peak Of A Bull Market?

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psei

Have you bought stocks at the peak of a bull market? Well, I did. Let me share you this story. Just like every newbie, when I bought my first stock, MEG, last July 2015, I didn’t realize that I bought it during the peak of a bull market. As the months passed, I observed that … Read more

How To Calculate The Average Price In A Stock Portfolio

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FINANCIAL STATEMENTS

One way to reduce your paper losses in the stock market is to lower your average price per share or simply to do cost averaging down. Here’s a simple illustration on how I reduced my losses by averaging down my average price per share. See the screenshots below; Fig. 1 Portfolio screenshot before This is … Read more

Why do most people lose money in the stock market?

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lose money in the stock market

[wpsocialboost] Despite the fact that the general market trend of the Philippine Stock Market is upwards, there are still investors that lose money. So why do most people lose money in the stock market? The reason for this is emotional investing. An emotional investor is an investor who makes emotional decisions based on market observation. To … Read more

[WATCH] COL EIP: Investing In The Stock Market Using Peso Cost Averaging Method

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col financial

Three years ago, I bought a motorcycle amounting to Php 160,000.00. I had it financed for 36 months with a monthly amortization of Php 6,675.00.

It was the happiest day of my life knowing that I now own a brand new Honda CBR150R Sportbike.

Back then I didn’t know about stock market investing until recently. I thought to myself what if I didn’t buy my motorcycle but instead invested the money that will be used to pay the monthly amortization to my loan to a certain company listed in the stock market?

I did a historical research and I decided to choose Ayala Land Inc. (ALI) as the company I wanted to invest. I plotted ALI’s stock price on a monthly basis for 35 months and here’s what I found out;

Fig. 1 Peso Cost Averaging Chart
Fig. 1 Peso Cost Averaging Chart

To briefly explain this chart, it shows that every month, I’m investing the Php 6,675.00/month to ALI to buying its shares.

For example, in the first line, I bought 295 shares priced at Php 22.65 on Aug. 10, 2012. As the months pass, the chart shows that when the price per share is high, I buy less shares. And when the price per share is low, I buy more shares.

When you get the average cost per share and compare it to the stock’s price for that day, you can see that the risk of loss is being minimized.

Peso Cost Averaging Method

Peso Cost Averaging is setting  a fixed amount of money to buy shares of stock on a regular basis regardless of whether the stock price is high or low.

Going back to the chart, the share price of ALI on June 5, 2015 is Php 38.80 and the average cost per share is Php 29.70. That’s Php 9.10 profit per share. If I decided to close my position on that day, that would be Php 71,591.80. That’s 31% gain in 3 years or 10.33% gain per year.

Not bad right?

But of course, this is historical data. No one will know what would be the future price of ALI today if you decided to invest 3 years ago. The price may rise, but it can also crash down. No one really knows. Past performance is no guarantee for future returns.

COL Easy Investment Program

There’s an automated way on how to do the Peso Cost Averaging method. COL EIP or Easy Investment Program allows you to set a fixed amount to buy shares of your chosen company. A detailed guide can be downloaded here.

You just need to top up your account every month and let the EIP do its job of investing your money automatically.

More details can be found here.

Final Thoughts

If I had practiced “delayed gratification” 3 years ago, I should have enough money to buy my motorcycle now and still have money left in my equity.

If you are looking for reasons to invest, this example might help you understand what you are missing and realize the future potential value of your money once invested in the long-term.

By using COL EIP, you’ll never have to worry about buying stocks. EIP provides you an easy way of automating your investing activities so that you can focus more on other areas of your life.

Happy investing!