Business Discipline Meets Historical Records. An MBA’s Review of Policy and Facts.
Search This Blog
My Thoughts on the Misunderstood PHP 8,000.00 Rule in Stock Investments
I think one of the most misunderstood rules is the PHP 8,000.00 rule. One reason why I decided to reach at least PHP 8,000.00 for my three GInvest funds (ATRAM Global Consumer Trends Feeder Fund, ATRAM Global Technology Feeder Fund, and the Philippine Equity Smart Index Fund) is because of that rule. Though, some people tend to misinterpret it that they shouldn't enter the stock market (in any way either through DIY trading or buying an index fund) until they have PHP 8,000.00. Personally, I took advantage of GInvest's minimum start-up for the local fund (start with PHP 50.00 but it's not going to grow big with just that) and the feeder funds with PHP 1,000.00 each. What I did (instead) was to slowly invest money until the minimum was met.
Why do I feel waiting until you have PHP 8,000.00 before you invest in a bad rule? The fees are there, yes, but you may not be able to take advantage of the low dips. The market is rather unpredictable with the supply and demand. Stocks get affected by company performance, economic performance, industry performance, and public sentiments. Instead, some people suggest doing cost averaging which is to invest the same amount per month.
The NAVPU goes higher or lower per month. Instead, beginners may want to try these two alternatives to reach a minimum of PHP 8,000.00 before adding more than that:
The first rule may be to invest PHP 1,000.00 for eight months.
The second rule may be to invest PHP 2,000.00 for four months.
The third rule may be to invest PHP 4,000.00 for two months.
Of course, I don't say to stop with PHP 8,000.00. Instead, it would be ideal to maintain PHP 8,000.00 for the purchase of a certain stock (for direct trading) or for the purchase of indexes and feeder funds. In my case, I prefer the use of the index fund (and it's Warren Edward Buffett's advice to most investors) and the feeder funds for global stocks. The idea is to try and reach PHP 8,000.00 within with three timeframes that I've mentioned. This is called cost averaging in order to minimize losses. I think waiting until you have PHP 8,000.00 then buying a stock or a stock index that amount during a bull market isn't very advisable. Sure, it's not wrong to buy stocks during a bull market. However, it's very risky to purchase by bulks during a bull market in contrast to a bear market.
For beginners, just think if you bought PHP 1,000.00 for eight months (or PHP 2,000.00 for four months) during a bull market. This would mean minimizing risks for those eight months. Then a bear market strikes and you start investing higher beyond the PHP 8,000.00 that was achieved. The bull market is still subject to lower performances so one may get more units during a bull market. In short, more units are bought when the NAVPU is down. Meanwhile, the bear market would mean getting even more units per PHP 1,000.00 purchased. The risk is rather minimized. Meanwhile, it might be a wise decision to purchase more shares during a dip (but only use the money you don't need now) than to remain investing the same amount. Though, some prefer cost-averaging since it tends to minimize risk. I tend to do a mixture of value averaging and cost averaging.
Though, it's much easier to invest PHP 8,000.00 rule in a wide array of portfolios
It's also right to invest PHP 8,000.00 immediately during a dip. Granted, my access to Philippine-based stocks isn't just my AXA Chinese Tycoon Fund (which uses PHP 3,000.02 regardless of bear or bull, read more here) but also my recent purchase of the Philippine Equity Stock Index Fund (read here). Let's say I decided to invest PHP 8,000.00 immediately in an index fund than individual stocks (which can be a burden for some). This PHP 8,000.00 will be allocated to the Top 30 companies that are in the Philippine Stock Exchange Index (PSEi). It would be interesting to know that you get a basket of stocks from companies like SM Investments, SM Prime Holdings, Banco De Oro (BDO), Ayala Corporation, PLDT, BPI, JG Summit Holdings, and Meralco to name a few out of the 30 companies listed.
One issue I have with direct stock trading is that it's not recommended by Buffett for most investors. Some people do prefer the direct trading approach (where they select their portfolio to buy and hold for some time). However, I prefer the equity fund approach (such as the index fund and feeder fund) to avoid having to do that much research. I think it can be tiresome if I have to slowly choose to invest PHP 1,000.00 until it reaches at least PHP 8,000.00 with one company and then choose the next. It might also mean that I'll have to reach PHP 8,000.00 for each company I'm investing in. Meanwhile, I think spending PHP 8,000.00 immediately over a diverse list can be a better idea. It's because the PHP 8,000.00 will be allocated like this:
SM Prime Holdings (13.2%) -- PHP 1,056.00
SM Prime Holdings (11.1%) -- PHP 888.00
International Services Container Inc. (7.2%) -- PHP 576.00
BDO Unibank Inc. (7.1%) -- PHP 568.00
Ayala Land Inc. (6.9%) -- PHP 552.00
Ayala Corp. (6.4%) -- PHP 512.00
PLDT (6.0%) -- PHP 480.00
BPI (7.0%) -- PHP 560.00
JG Summit Holdings Inc. (4.3%) -- PHP 344.00
Meralco (3.3%) -- PHP 264.00
It all gets allocated into several funds in one basket. It would be easier to apply the PHP 8,000.00 rule with a basket of stocks than to individual stocks. Though, those who are better are more comfortable applying the PHP 8,000.00 rule across various stocks. Personally, I think I'd take the side with the majority in Buffett's advice. I don't intend to stop with PHP 8,000.00 for all three investments. In fact, I placed more than PHP 8,000.00 in my Philippine Equity Smart Index Fund. I want to put more into the feeder funds I just bought but they're not in a dip. So, it might be wise to simply allocate PHP 1,000.00 each until it reaches another certain amount. I'm not going to spill out the final amount either for confidential reasons.
The Sunday Guardian Years ago, I wrote about Venezuela's pride and protectionism , under a more "formal" style of writing compared to my latest posts. I decided to use an even "less formal" and "less academic" tone since I'm not writing a term paper. Instead, it's like how a professor and a student discuss the thesis using first person over third person, using contractions, etc., while the thesis doesn't use such tones. Back on track, I thought about the arrest of Venezuelan President Maduro can spark debate. Was it a violation of sovereignty? I'm no expert on international law. However, Venezuelans can be seen celebrating Maduro's arrest. Right now, I'm using Gemini AI and Google search to help me find some sources for this blog. It's because I don't want my blog to become another gossip central, but a place to discuss facts with my own personal opinions (making sure they don't derail the facts). I used Venezuela ...
The Telegraph Venezuela is an oil-rich country yet it's a very poor country. Somebody could go ahead and give every unthinkable reason such as "foreign investments caused it" (a blatant lie) and "It's because America had economic sanctions in Venezuela". Yet, the answer can be found in several causes such as corruption. Yet, China and Vietnam, which can be seen to still have a good amount of corruption, are far more successful. The answer also lies in one policy--economic protectionism . The very idea that a country that first world countries used "protectionism" to succeed is a lie as proven by Venezuela's ongoing crisis. A common-sense examination of one root cause of Venezuela's continuing crisis Forbes magazine mentions this in "What Do Investors Need To Understand About Venezuela's Economic Crisis?" by Nathaniel Parish Flannery on December 21, 2016: Venezuela is far and away the worst-managed economy in the Americas . Ad...
The real issue isn't that something is old or new. Instead, if something old or new still works, or doesn't work! Many modern laws are built on some ancient principles, while adjusting to the current times! The Constitution of Japan is actually older than the 1987 Constitution of the Philippines. However, it's more effective for the reasons that (1) their constitution is silent when it comes to regulating economic activities (ex., protectionist measures), and (2) it's a parliamentary system. Honestly, it's a pretty straightforward constitution compared to ours! As Mahatir Mohamad turned 100 today, I would like to raise up Atty. Hilario G. Davide Jr. once again. The problem isn't Davide's age but his unwillingness to embrace change when needed (read here ). This time, it's time to bring up a contrast between wise old people and unwise old people. A young person can be right where the old person is wrong. A young person can be wiser because he or she lea...
Here's a picture from the Dose of Disbelief Page on Facebook. Here's something that it wrote: Filipinos once trusted locally made products more than imports. Before World War II, the label "Made in the Philippines" carried prestige, not stigma, reflecting a strong sense of national confidence in domestic production. Local products such as shoes, cigars, textiles, furniture, and food were often preferred over imports. This preference was rooted in the belief that local goods were better adapted to local conditions, tastes, and were often of comparable, if not superior, quality. This period showcases a strong historical era of consumer nationalism and thriving local industries. We need to look into the context of Filipino history If we look at the Philippine history timeline , we must account for 1935-1940, during which the Philippines was under the Commonwealth government. Independence was declared from Spain on June 12, 1898. However, there was a transition period w...
I guess those fools of the Philippine Anti-Fascist League (and many of its deluded supporters) either refuse to get it or are blatantly lying. Almost every rally held by what many believe are CPP-NPA legal fronts also confuses foreign investors for foreign invasion or even foreign imperialism . Once again, do I need to say that 100% FDI ownership is all about the shares and not land ownership ? What makes it even more hypocritical is that they are actually recording these things on imported media . They're sharing their anti-FDI rants using imported devices, imported platforms, and imported social media (read here ). When I do ask them on Facebook, they say how can they take them seriously and that they're "simply forced to participate in capitalism". Did anybody (especially those they call "evil capitalists") force them to buy the expensive Apple equipment when they could've settled for Xiaomi or Huawei? A simple research on the dictionary will tell us...