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:

1.  The first rule may be to invest PHP 1,000.00 for eight months.
2. The second rule may be to invest PHP 2,000.00 for four months.
3. 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:

1. SM Prime Holdings (13.2%) -- PHP 1,056.00
2. SM Prime Holdings (11.1%) -- PHP 888.00
3. International Services Container Inc. (7.2%) -- PHP 576.00
4. BDO Unibank Inc. (7.1%) -- PHP 568.00
5. Ayala Land Inc. (6.9%) -- PHP 552.00
6. Ayala Corp. (6.4%) -- PHP 512.00
7. PLDT (6.0%) -- PHP 480.00
8. BPI (7.0%) -- PHP 560.00
9. JG Summit Holdings Inc. (4.3%) -- PHP 344.00
10. 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.