How to Protect Your Family’s Finances When the Market Feels Uncertain

 

 

When the markets feel shaky, scandals breaking, politics heating up, uncertainty in every headline

it’s easy to feel anxious about what comes next. But moments like these remind us of one simple truth: 

we can’t control the market, but we can control our own household finances...

And that’s where real security begins.

Now is the time to strengthen your foundation, protect your savings, and make sure your family is ready for whatever the future brings. 

You don’t need fear. You just need a clear plan and steady habits.

Let’s walk through the five practical steps every family should take today, especially when the times are this uncertain.

Increase liquidity and shorten time-horizons

Maintain a larger cash or near-cash buffer (e.g., a 6–12 month reserve), and favor shorter-term, liquid investments (money-market funds, short-term government/corporate bonds) rather than locking into long-term illiquid assets.

Why: When political risk rises, policy or regulatory changes can be abrupt, assets can lose value quickly or suffer liquidity squeezes.

Having assets you can access quickly gives flexibility to respond to sudden adverse developments without forced fire-sales.

Diversify both geographically and by asset class

Don’t concentrate too much of your portfolio in Philippine equities

Consider spreading part of your family’s investments abroad (developed markets, global diversified funds) and across different asset-classes (equities, bonds, gold).

Why: Domestic corruption and policy-risk can disproportionately hit local markets and sectors. 

For example, infrastructure and government-contract sectors could be exposed to investigations and delays (as is currently the case with flood-control projects). 

Assets tied closely to the domestic political-chain are riskier. A foreign-asset allocation helps reduce this “politics-tail” risk. 

Review and tighten risk exposures and governance

Conduct a portfolio audit: identify vulnerable assets (e.g., companies heavily reliant on government contracts, local infrastructure firms, real estate whose value depends on uncertain permits). 

Why: Corruption scandals and the state’s response (probes, seizures, asset-freezes) increase the risk of sudden losses or reputation/operational risk for firms closely tied to government projects. 

Hedge currency and inflation risk

Given the political uncertainties, ensure part of your wealth isn’t purely in Philippine pesos or peso-denominated assets. 

Consider holdings in hard currency (USD, EUR) or foreign-currency bonds and assets that hedge against domestic inflation or currency devaluation.

Why: Poorer institutional quality and higher political risk tend to correlate with higher inflation, currency weakness and capital flight. Indeed, research shows that reduced political stability ties with higher inflation in emerging markets. 

By diversifying currency and inflation exposure, you protect your family’s purchasing-power in a worst-case local scenario.

Focus on low-risk, essential assets and review debt commitments

Prioritize owning assets that serve essential needs (your home, reliable transport, emergency-fund) and avoid taking on high leverage (large loans, speculative property acquisitions) in the current environment. 

Ensure your debt service is sustainable even under adverse events (job disruption, regulatory shock, asset-value drop)

Why: In periods of political/economic stress, non-essential assets and high-leverage positions tend to be the first casualties. If regulatory changes, protests, or governance breakdowns hit, you want the family positioned to stay afloat rather than chase high returns. 

Concluding Thoughts

The situation is not a signal to abandon investing or go into panic mode, the market still offers growth opportunities, but it is a signal to conserve and fortify before chasing high returns.

By focusing on liquidity, diversification, governance, inflation/ currency hedge, and avoiding leverage, you position your family to survive turbulence and take advantage when the environment stabilizes.

Treat the current situation as a potential “shock-event” scenario, build resilience into your plans, and ensure your family’s financial foundation is strong irrespective of the outcome.

All the best my friends!!

#acgadvice

Why cost-averaging makes sense, especially for starting investors

Top 5 benefits of cost averaging whether the market is going up or down

1. Reduced Impact of Timing Risk

Cost averaging distributes your investment across different time periods, mitigating the risk of investing at market highs. It ensures that you don't invest all your money at an inopportune time, as even in a rising market, there will be fluctuations. This strategy allows you to buy more shares when prices are low and fewer when they are high, thus reducing the risk associated with market timing.

2. Disciplined Investment Approach

It eliminates emotional decision-making in investing. Even when the market trends upwards, maintaining discipline through regular investments avoids panic-driven transactions. This steady approach can assist long-term investors in accumulating wealth methodically, undisturbed by market fluctuations.

3. Cushion Against Short-Term Volatility

While the overall market may be on the rise, short-term declines can still occur. This strategy allows you to take advantage of these dips by purchasing additional shares at a lower price during these fluctuations, which can smooth out volatility over time, even amidst an upward trend.

4. Encourages Long-Term Focus

Consistent investment, irrespective of market conditions, encourages investors to concentrate on building long-term wealth instead of attempting to predict short-term market fluctuations. This approach is particularly beneficial during upward trends, as it underscores the significance of remaining invested over the long term rather than fretting over short-term market corrections.

5. Automatic Investment Discipline (Good for Beginner Investors)

Even when the market is performing well, new investors may be reluctant to invest large amounts at once. Cost averaging allows them to stay invested without the stress of determining if the current prices are too high or too low, thus encouraging a consistent investing routine.

Cost averaging in a rising market may not maximize returns in hindsight, but it offers these crucial benefits of discipline, risk mitigation, and long-term consistency, which are key pillars for successful investing.

All the best my friends!!

#acgadvice

How Investing in Mutual Funds Can Help You Achieve Your Financial Goals

Investing in mutual funds is a popular and effective way to achieve your financial goals. Whether you're saving for retirement, funding your child's education, or looking to build wealth, mutual funds offer a diversified, professionally managed option that can help you reach your objectives. Let's explore how mutual funds can be a valuable part of your investment strategy.

Diversification Reduces Risk

One of the primary benefits of investing in mutual funds is diversification. Mutual funds pool money from many investors to buy a wide variety of stocks, bonds, or other securities. This broad mix of investments helps reduce risk because it spreads your money across multiple assets. If one asset performs poorly, the impact on your overall investment is minimized. Diversification is especially important for new investors who might not have the time or expertise to research and select individual securities.

Professional Management

When you invest in mutual funds, you're entrusting your money to professional fund managers. These experts have the experience and resources to analyze market trends, economic conditions, and individual securities. They make informed decisions to buy and sell assets, aiming to maximize returns and manage risk. This professional management can be particularly beneficial if you lack the time or knowledge to actively manage your investments.

Accessibility and Convenience

Mutual funds are accessible to a wide range of investors. You can start with a relatively small amount of money and make regular contributions over time. Many mutual funds offer automatic investment plans, allowing you to invest a fixed amount each month. This convenience makes it easier to stick to your investment plan and gradually build wealth. Additionally, mutual funds provide liquidity, meaning you can easily buy and sell shares, giving you flexibility to access your money when needed.

Achieving Specific Financial Goals

Different mutual funds are designed to meet specific financial goals. For instance, growth funds focus on capital appreciation and are suitable for long-term goals like retirement. Income funds prioritize generating regular income, making them ideal for retirees or those seeking steady cash flow. Balanced funds offer a mix of growth and income, providing a middle ground for investors with moderate risk tolerance. By choosing funds that align with your goals and risk tolerance, you can create a tailored investment strategy.

Continuous Growth and Adaptation

As your financial goals evolve, so can your mutual fund investments. You can adjust your portfolio by reallocating your investments among different funds to match changing risk tolerances and time horizons. For example, as you approach retirement, you might shift from aggressive growth funds to more conservative income funds. This adaptability ensures that your investment strategy remains aligned with your financial objectives at every stage of your life.

In conclusion, mutual funds are a versatile and effective tool for achieving a variety of financial goals. Their diversification, professional management, accessibility, goal-specific options, and adaptability make them an attractive choice for both novice and experienced investors. By incorporating mutual funds into your investment strategy, you can take a significant step towards securing your financial future.

All the best my friends!!

#acgadvice

The Biggest Risk of Long-term Investing is not the market

 

How do we manage risks of a long-term investment portfolio? Most would suggests employing investment management strategies such as diversification and asset allocation, 

The question of whether a goose that lays golden eggs or the golden eggs themselves are more important is subjective and depends on the context and individual perspective. Let's explore both viewpoints:

The Goose that Lays Golden Eggs: Some may argue that the goose is more important because it represents a sustainable source of wealth. The goose has the ability to continue laying golden eggs, providing a consistent and ongoing stream of value. By prioritizing the well-being and care of the goose, one ensures the longevity of the golden egg production. In this perspective, the focus is on long-term sustainability and the potential for continued prosperity. This is the analogy for the HEALTH and WELL BEING of the investor.

The Golden Eggs: Others may argue that the golden eggs themselves are more important because they represent immediate wealth and tangible benefits. The golden eggs are valuable and can be used or traded for various purposes, whether it be investment, consumption, or achieving financial goals. This viewpoint prioritizes the immediate gains and focuses on maximizing the value extracted from the eggs. This is the analogy for the INVESTMENT PORTFOLIO.

Ultimately, the answer may depend on one's goals, time horizon, and personal values. Balancing the short-term benefits of the golden eggs with the long-term sustainability of the goose is often considered an ideal approach. By recognizing the value of both the goose and the golden eggs, one can aim for ongoing wealth creation while enjoying the immediate rewards.

In a broader sense, the question can also serve as a metaphor. It raises considerations about the importance of nurturing and maintaining sustainable sources of wealth versus focusing solely on immediate gains. It encourages a strategic and balanced approach to wealth management and the recognition of the underlying factors that contribute to long-term prosperity.

The biggest risk of investing whatever the goal, time horizon or personal values is the HEALTH of the investor, because from a financial perspective, the biggest possible threat to the value of an investment portfolio is the sudden, large withdrawals to pay for the treatment of a critical illness!

Mitigate this risk by attaching a critical illness coverage!

All the best my friends!

#acgadvice

Can the US Debt Ceiling Issue can affect your client's portfolio

 #ctto

DISCLAIMER: Personal Opinion, not to be construed as financial advice

The United States has been on "trade deficit" for decades, in layman's terms this is spending more than what it is earning. 

To finance itself, it has resorted to borrowings usually by the sale of debt securities in the form of Treasury Bills and Notes, countries with surplus bought these en masse as there is no other outlet for their massive dollar holdings. China and Japan (countries with trade surplus with the US) notably held large quantities of these treasury securities.

As a check for fiscal responsibilities, the US Congress has set certain limits on how much the US government can borrow, this is the "Debt Ceiling" currently at $ 31.38 Trillion

As the US government has already spent most of it, it is now in a situation where it can default (because it run out of cash) which could lead to a lot of negative consequences, imagine a borrower of yours telling you that he can't pay what he owes you.. how would you react?

The current issue is whether the US Congress will allow the raising of the Debt Ceiling enabling the US government to borrow more.

If this is not approved, it may lead to a downgrade of US credit rating which will push US interest rates up as it will be deem "riskier" and will be forced to offer a higher rate - higher interest is generally not beneficial to the stock market so a portfolio rebalancing may be in order for our clients to reduce their equity exposure.

If this is approved this will lead to a deluge of new treasury bills issuance (some estimate up to $1 Trillion), as the US may maintain its credit rating and as these new supply starts flooding the market, this may lead to lower interest which will be beneficial to equities - for our client's portfolio maybe add on more equity exposure.

All the best my friends!

#acgadvice

Are VULs really better than bank deposits?

 

The staple pitch among financial advisors is comparing the "rates of return" of a savings account with the projected returns of a VUL, how the low interest rate of a savings account is not overcoming the negative effects of inflation over time leading to significant losses in purchasing power.

While data has shown the outperformance of funds over a savings account, this must be presented in the proper context.

First is that the nature of the returns is not comparable.

A savings account is categorized as a "lending" type of vehicle, that by depositing the money in a bank, we are effectively lending the money to the bank in return for compensation in the form of interest. This rate is normally fixed and the funds are withdrawable anytime.

The liquidity (withdrawable anytime) of a savings account is the reason why rates are normally very low.

A VUL (or mutual funds/UIT) is categorized as "owning" vehicles, that money invested is replaced by ownership (units/share) in the fund at the price the investment is made, for example funds are invested in ABC equity fund selling for Php 2/unit, a Php 10K investment will now be converted to 5,000 units of the fund (Php10k/Php2/unit) assuming zero transaction costs (entry fees, COI, etc), how much the returns would be going forward will be dependent on how the fund is invested. So if the fund is an equity fund (predominantly invested in the stock market), the price of the fund will be how the stock market behaves going forward.

If the market goes up, the price of the fund will follow resulting in some gains for the investor, but if the market went down, the price of the fund will also drop. The best way to handle this volatility (ups and downs) is to hold on to it for longer periods of time.

It is not withdrawable anytime because to cash in, you have to sell your ownership (units/shares) at the prevailing price, which could be lower than your purchase price.

Having said these, are VULs better than bank deposits?

It really depends on the timing and intent of your investment decision.

• If your current excess funds are meant to act as buffer for any income shortfall, you need liquidity so a savings account is better.
• If your current excess funds are meant to finance a "financial goal" happening years into the future, then a fund (whether a VUL, MF or UIT) may be a better option.

All the best my friends!

#acgadvice

Watching "Family Feud" may improve your stock picking skills!

I recently discovered re-runs of the very successful game show Family Feud on YouTube, there is this particular episode where a beauty queen was asked the question - "What practice would you eliminate if you became CEO", as beauty contestants were quite adept in Q&As, she gave a brilliant answer, she said that she would eliminate "Glass Ceilings" in the office!! 

(The phrase is commonly used to describe the difficulties faced by women and minorities when trying to move to higher roles in a male-dominated corporate hierarchy. The barriers are most often unwritten, meaning that these individuals are more likely to be restricted from advancing through accepted norms and implicit biases rather than defined corporate policies.

 (The Glass Ceiling: Definition, History, Effects, and Examples (investopedia.com)

Guess what? the answer is incorrect! because the basis for correctness is not the brilliance of the answer but the opinion of a hundred Filipinos who were asked the same question. unfortunately, it is not the popular opinion.

This brings to mind a well-known advice given by one of the most prolific minds in modern economic history - John Meynard Keynes on stock picking - this is what he has to say...

more on the "Keynesian Beauty Contest insight here - Keynesian beauty contest - Wikipedia

Keynes observed that since the stock market is participated by "opinionated investors", the stock that eventually rises may not be the stock you think has the most potential, but the stock that the majority of market players believed will do. An illustration of the Keynesian Beauty Contest Analogy is where judges are rewarded for selecting the most popular faces among all judges, rather than those they may personally find the most attractive.

So, a word of caution the next time you think you have a big winner on hand, is it a big winner that a large number of stock market players will also believe in? if not, don't bet your house on it!!

All the best my friends!

#acgadvice

Governments are Worried about Inflation, should we?

Last week, the US Federal Reserve Board announces another rate hike to combat rising inflation currently doing at 7.1% (November 2022), this is not surprising as this is way beyond their inflation target

What Is Inflation Targeting?

Inflation targeting is a central banking policy that revolves around adjusting monetary policy to achieve a specified annual rate of inflation. This is known as the target rate, which is normally set at around 2% to 3%.

The principle of inflation targeting is based on the belief that long-term economic growth is best achieved by maintaining price stability, and price stability is achieved by controlling inflation. (https://en.wikipedia.org/wiki/Federal_funds_rate)

As the biggest economy in the world, this policy decision by the US Fed influences the rest of the world including the Philippines, expect that the BSP would be announcing hawkish monetary policies along this line

How does this affect us?

Higher interest is a double edge sword - this is generally good for savers as we could expect an uptick in the interest we are getting for our savings, but a bane for borrowers as this would translate to higher costs, this is especially disadvantageous to corporate borrowers as the extra cost in borrowing may eat into their profit margins

This is why the stock market normally reacts negatively to interest rate hikes or even just the prospects of it

2023 Investment Approach:

• Ensure that you have sufficient liquidity (at least 3 to 6 months of expenses)
• Funds placed in any equity linked vehicles may not provide any capital gains in the near term
• Just like any other economic indicator, interest rate policies move in cycles, so if you have extra funds that you can set aside for a year or two, picking up some bargains may make sense. As there would be quite a lot of volatility going forward, take a "cost averaging approach", the best would be taking position on a monthly basis (whether VUL, MF or UIT)

Disclaimer: This may not be suitable for you considering your specific financial circumstances, best to consult with a financial advisor

all the best my friends!

#acgadvice

How optimistic would you be if Warren Buffet manages your retirement portfolio?

As of May 12 of this year, the US market as measured by the Standard & Poors Index is down by more than 18%! Retirees invested in the US market will see their retirement fund shrunk by almost the same amount! This is a serious number! Provisions intended for 10 years will now be sufficient for only 8.2 years.

Berkshire Hathaway on the other hand is UP by 3.8%! a similar 10 year retirement fund would have grown by about 5 months!

Over the last 10 years, Berkshire Hathaway grew by 336.4% over the S&P 500 195.6%!

How great would it be if we have the great Warren Buffet as our fund manager!

Some may have access and resources to invest in Berkshire, but for those without, is there any way to generate returns in a volatile market?

Success in investments is all about "choosing" the right mix of assets to be included in your retirement portfolio, as each asset class will have its own specific risk to reward characteristics, to optimize returns and to minimize risk as much as possible, the key is to decide how much percentage of each asset class should you allocate your funds to

Two guidelines?

Time horizon - the years to your retirement

the earlier you start will give you the advantage of having the ability to be more aggressive, as risk is almost always relative to return, placing a larger portion of your funds in equities may translate to two benefits, first is that the amount of money needed to achieve a target retirement fund level may be smaller (hence cheaper), as the higher projected returns may translate to a higher growth rate

the second benefit is that allocating the same amount of money may grow to a much sizeable retirement fund

Accept "volatility" as a fact in generating returns

The market will not be moving up or down in a straight line but in a series of oscillations, a proper asset allocation strategy from the onset of the investment will provide the flexibility to take advantage of these swings

a 60/40 (equity/bond) portfolio for example will have a different asset percentage distribution after a period of time, in a case where the stock market goes up, it may become 65/35 because of stock market appreciation, the idea here is to bring it back to 60/40 by moving the excess funds from equities to bonds, this is the so called re-balancing

regular re-balancing serves two purpose: first it that it sets a limit to the amount of risk to the portfolio, a 60% allocation to equities limits market risk exposure to 60% of your retirement fund, second is that it provides an automatic mechanism for profit taking, this can serve as buffer when the need to average down arises as the market moves down

we may not have the privilege of having Mr. Buffet manage our retirement fund, a structured disciplined approach (asset allocation + regular re-balancing) may be the second best approach to achieve our retirement goals

all the best my friends!

#acgadvice

When the U.S. sneezes, the world catches a cold

My financial education was brought up in an environment when the US markets rule the world.

In the mid-90s when I was with a fund management company, we make it a point to check the results of US trading every morning before we go out and meet our distributors, this provides a starting point for market updates we give throughout the day, and if the market is extra volatile (up or down at least 2%), we would shift through the news to try to find clues for its next move, these information somehow gives our sales partners a certain sense of comfort in believing that the market is somewhat rational and any moves can be explained away in a logical manner.

The financial services industry is sometimes categorized into the “Sell side” and the “Buy side”, Sell side are companies involved in creating products and services that aims to generate returns on the market, the buy side companies are the pension funds and investors in general who buys these products to include in their investment portfolio

Financial advisors in general, as they are offering products and services can be grouped with the Sell side, while the insurance companies they represent are generally grouped with the Buy side as they continuously source out financial products to be used as building blocks to the Life Insurance products they create

This insight is useful in understanding how the markets may influence the context in which information is gathered and disseminated

The Sell side obviously would focus on the more positive aspects of the markets to make their product offerings more saleable while the Buy side may be more critical in their study of the market as a faulty view may affect the viability of the products they create and place the reputation of the company at risk

The Sell side’s context in the market updates they provide can be summed up as “what can go right given the circumstances” while the Buy side focuses on “what can go wrong”

As we create our own market narrative it would be helpful to seek inputs from both sides, combining insights from “what can go right” and “what can go wrong”

My own experience tells me that divining the next market move is quite difficult, no matter what the forecasts is (either up or down), the odds of being correct six months from now would be 50/50 at best

This builds the case of having a proper asset allocation strategy before committing any funds to the market, spread out your investible funds in assets that are generally uncorrelated, this would provide the flexibility to adjust your market exposure which may help in generating consistent positive returns over the long term.

All the best my friends

#acgadvice

Does the stock market follow the economy?

There are a lot of debate as to whether the stock market is reflective of economic developments, some says it does, while others say it don't

In the last two years of the pandemic, the stock market as measured by the PHISIX seems to show a direct correlation between the general economy and stock market levels

A lockdown, quarantine or any restrictions on mobility has an adverse impact on businesses in general, it lowers the volume of business transactions leading to tighter margins for listed companies, GDP for the second quarter of 2020 dropped by more than 16% as a result

The slowing down of the transmission of the virus, vaccination programs of the government or any policy decisions leading to more relaxed restrictions is seen as positive for businesses hence the market reacted positively

while the debate goes on, it helps to keep an open mind and continue learning

all the best my friends!

#acgadvice

If interest rates start rising? should we switch to bonds?

 

The Philippine central bank held its benchmark interest rate at a record low of 2 percent during its December meeting, saying the current monetary policy stance is appropriate to support the economy amid uncertainty over the fallout of the new Omicron coronavirus variant and as inflation expectations continue to be anchored to the target level. The interest rates on the overnight deposit and lending facilities were also kept at 1.5 percent and 2.5 percent, respectively. Policymakers noted that the projected inflation path remains within the inflation target band of 2-4 percent over the policy horizon, despite the higher-than-anticipated inflation outturn in November, while downside risks to the economic recovery emanate from the emergence of new COVID-19 variants as well as the potential tightening of global financial conditions. 

source: Bangko Sentral ng Pilipinas

The world's central banks manage interest rates levels as a lever to influence the direction of the economy, it's also their primary tool in combating inflation - the financial scourge of modern times

at the onset of the pandemic when most businesses slowed down due to social restrictions, major central banks start cutting interest rates as a way to spur economic activities, the idea here is to make borrowing expenses more affordable to provide companies with a cheaper source of funding to maintain their operations.

but there is only so much that interest rates can be lowered, nearing zero with no more room for further cuts, central banks resorted to infusing liquidity into the system through the purchase of bonds and other fixed income securities

These massive amount of liquidity may push prices higher causing inflation

The common reaction of central bankers to counter inflation is to raise interest rates, higher rates could reduce liquidity by attracting idle funds to resulting higher paying fixed income instruments

The stock market usually reacts negatively to rising inflation and interest rates, should we switch to bonds?

If your investment objective is current income from the regular coupon payments, then bonds can be a good option, as rising interest rates may cause bond prices to fall, be on a lookout for good bargains once it starts going down

how about bond funds? it follows the same principle, it may "drop first" to adjust to higher interest rates, the best entry would be when interest rates starts tapping out

for now, idle funds are best placed in short term placements that reprice higher every time you renew

all the best my friends!

#acgadvice

How important is your "risk tolerance" when choosing an investment?

 

One of my earliest client when I was starting in PAMI way back in 1995 was a lady who keeps telling me she is a conservative investor, she asked me which among the mutual funds we offer is the most appropriate for her

with this information, I promptly recommended our bond fund - a fund that invests primarily in high grade corporate bonds and government securities

I visited her in early 2020 just before the lockdown to give her an update, I happily reported that the 500,000 she initially invested in 1995 in the bond fund is now worth 1.3 million - a 166% GAIN!

Leaving her office a thought came to my mind, considering her long holding period (25 years), what if I recommended the equity fund instead? 

Lesson learned: as financial advisors it is important that we ask all the appropriate questions during our interview, aside from knowing a client's risk preference, we should also try to find out the client's intended holding period among others, combine these information together to come up with a more market responsive financial advice

#acgadvice

Will the stock price of "SM" go back down to 100?

one of the "fictional anecdotes" I share during my talks to help investors alleviate their fear of the stock market's inherent volatility and the need to hold on to great companies over the long term to maximize returns

Let's say way back in 1972, a businessman decided to open a retail business, he raised his initial capital by selling shares in his new company "SM" for 100/share and you are one of those people who were able to buy

He was a very good and astute businessman that after 49 years, he has grown his retail empire to 76 malls in the country and 7 abroad

Question! After holding on to the stock for so long, what is the possibility that the price of "SM" shares will go back to 100 today?

One of the greatest speculators of all time, Jesse Livermore is known to accept the futility of market timing exercises when he said that “throughout all my years in investing, I’ve found that big money is not made in the buying and selling (of stocks), the big money is made in the waiting.”.

think of buying stocks as going into business, as businesses including the successful ones are not immune to ebb and flow of business cycles, its growth would not be in a straight line but in a series of oscillations, this could account for the share price short term fluctuations (volatility)

#acgadvice

Does Asset Allocation really work?

you have money to invest, seeing that the market is now battered by news of a mutated variant of covid-19 (omicron) the current level looks promising to you as you have a 10-year time horizon, should you placed it 100% of your money in an equity fund?

market volatility will persist over the short-term and the best approach to mitigate much of this volatility is to allocate 60/40 between equities and bonds

allocating it in the beginning is just the first step, regular re-balancing at least every six months going forward should be done to make this work 

let's say after six months:

the idea of re-balancing is to bring back the allocation to 60/40, the illustration below shows how it may improve our final returns

this is tedious you might say, this is a lot of work to do as considering it has to be done every 6 months in the next ten years

is there any benefit to this? lots of academic studies have shown that regular re-balancing would actually increase final return and lessen investment risk

#acgadvice

Is the stock market a casino?

 

The popular belief that successful stock market investors are those who made a lot of money buying and selling shares irrespective of the length of the holding period or the quality of the stock they bought. This is possible in the stock market because of its dynamic pricing mechanism and excellent liquidity; participants would immediately know whether they have made the right “BET” or not.

Personally, I believe that investing in the stock market should not be treated like a competitive sport, where the person who generates the most amount of money in the shortest possible time is hailed as a modern-day hero of sorts.

Sure, there would be a handful of people who can demonstrate that their market timing abilities work, but these would be exceptions rather than the rule.

I remembered an analogy given by a finance professor so many years ago,

“ten years ago there were 1,000 traders who started investing money in the stock market, as the odds of being right or wrong is 50/50 (you either buy or sell) every year; after a year only half (500) would be proven right, 

Extend this to ten years and on the tenth year only 2 would be left standing,

is this because of stock picking skills? Or just because of pure luck?

All of these perceptions, in my mind create undue pressure on newbie investors making them believe at the onset that the stock market is just like a casino where the objective is to amass as many wins as possible. Unfortunately, the Law of Probability catches up with them sooner or later, eliminating one more long-term investor.

#acgadvice

Why the stock market is sometimes irrational

Fundamental analysis says its a "BUY", this is supported by strong buying signals from your technical charts!

but when the market opens, the price drops! why is this so?

like any market where there are buyers and sellers, the actual number of buyers buying and sellers selling at any specific time will determine the actual price, no matter what prior analysis shows

so if there are a lot more sellers, the price will drop no matter how strong the fundamentals is, and if there are more buyers, the price will go up even if the company is losing money maybe because it had good prospects or an excellent PR team (he he)

Checking the trading volume (available in the PSE website) and maybe net foreign position on the stock may give some indication

#acgadvice

Does "peso cost averaging" really work?

 

as illustrated, peso cost averaging improves effective entry price by going into the market at regular intervals, this allows the capture of different price points that is inherent in volatile markets such as the stock market

#acgadvice

Tracking GDP, does it really matter?

 

Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. As such, it also measures the income earned from that production, or the total amount spent on final goods and services (less imports).

whether we deposit money in a bank or or buy stocks, we are in effect providing funding for borrowers including businesses

and the level of economic activities (all the buying and selling of goods and services) may affect the volume of a company's sale of its goods and services, naturally we would like to see it selling more as this would translate to more profits, the GDP is an indication of the level of economic activities

latest reports show a very encouraging number, up 11% for the second quarter of 2021

#acgadvice

Timing the market? analyze it first!

 

#acgadvice