Investing in Philippines: What To Do When The Stock Market Is in Red

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Thursday, May 17, 2012

What To Do When The Stock Market Is in Red

source: http://www.you-stylish-barcelona-apartments.com


Was kinda busy this week preparing for my short trip to the Philippines to renew my CPA license and cant help to notice that the Stock Market, yes the whole wide world stock market, is in red.

So a question what should I do in such situation?

Well all I can do is share my past experience.... so don't follow every advice I dispense in this post because it might not be right one for you.

Panic

Yes I remember the days when I was a very "newbie" guy in this game. I always check my stock portfolio everyday in a normal day, and every hour in a red day. I am really fearful my stock's value starts to go down in specially when it hits my psychological stop at -5%. 

Imagine how I look, totally focus on the screen with multiple open windows and shaking. I thought I ddid something wrong or I made a bad stock purchase and of course I thought I was losing money big time.

Well I was wrong. I sold the stock and after a week or two its price jump back 15-20% thus I lost the chance to actually earn 10-15%.


Cost Average

Well this strategy is okay only if you are accumulating. 

But if you intend to sell your positions because you have an expense coming I guess you will miss your target. You see the purpose of cost averaging is to spread your cost over time. Thus if your goals are short term you wont make it.

It is good to cost average but always look at your time horizon, you might end up waiting in vain and regretful when the stock's performance is stagnant for a long time like what I did with my AC(Ayala Corp.). 

I waited nearly a year and a half but nothing happened. I cost average from time to time until my position was nearly 100,000 pesos. When the stock's price went up by about 3-5% I sold it right away.

In the next few weeks AC's stock price went up further and boy I was regretful again. I didn't have the patience to wait further thus missed a great opportunity.


Do nothing for now

Yes another thing to do when the stock market is red is to do nothing until a signal that a reversal is coming. I guess this is the wisest I did.

So right now I am waiting for the market to reach rock bottom before actually going into a buying spree. But if you have cash and feel like shopping it is good to start choosing now and time at the best price the stock has to offer.

What do you think we should do on a Red Stock Market? Share your thoughts in the comment box.

4 comments:

jongenese said...

Do nothing and wait for the reversal :)

Lyn Lyn said...

Patience is a virtue when it comes to a red stock market. As long as we have determined our level of risk appetite, there's nothing really have to "rush" in selling our shares if it's going down (as long as these are blue chips company). Why would you sell when you never really have a "dire" need of money? Hehehe... Take a hush, log-out of your trading account, breathe, enjoy life. :)) There's more to life than checking the market. hahahaha! [This is what I tell my brother when he was recently affected by the market going down.]

On a lighter note, have fun in the Philippines! Inggit me..! hehehe... Wish December na, pra bakasyon na rin ako. =) God bless!

Investing in Philippines said...

Thanks Sis Lyn and bro Jongenese

Well as long as your positions are of good stocks then you shouldn't worry. If you hold some speculative stocks or trading stocks its best if you time the market and just earn as much as you can... buy low sell high but don't get too attached and don't buy huge chunks just enough to make small "barya-barya" while waiting for the reversal

Louis Delos Angeles said...

By the way I wish I could fully enjoy the vacation its just one week sis Lyn.... its so kulang with my beloved Mommy Krissy!!!! But At least I was able to tick off one of my must do for 2012 (wink)

Chitika