Foreign investments dominate the Philippine Stock Market. In 2012 alone, the direct foreign investments reached US$110 billion. This is because the foreign investments arrive in our shores as international currencies. Out of all the currencies, United States’ dollar is popular. This is why our Philippine Stock Exchange index (PSEi) is highly affected by significant American events.
The recent triumph of Donald Trump against Hillary Clinton took a toll on our PSEi as it plunged to 2.58% last week. This is the lowest level it has been since March 2016. With its current situation, should you worry about what the market did today?
Pause for a while. Do not worry! Do these steps instead:
Step 1: Emotionally Prepare for the Loss
As a precautionary step, you must prepare yourself for the different types of loss by weighing your risk tolerance. The rapid fall in the market can cause early investors to be mortified. A good way to cushion this shock is by playing around the stock market simulators before diving into the “real thing”.
Stock market stimulators mimics the unpredictable flows of the stock market and provides you with a (fake) virtual wallet. This will enable you to understand your risk tolerance and to establish your personality as an investor.
Step 2: Stick to Your Investment Strategy
If your portfolio is beaming the red lights because the market is down, sticking to your investment strategy is almost always beneficial.
For instance, you entered the stock market with fundamental analysis on your belt. This strategy is straightforward and research-based. The goal of this strategy is to find out whether the intrinsic value (i.e., personal belief of how much the stock is worth) is more than its current share price. It is time to purchase the stock if the intrinsic value is higher than its market price.
Since your long term timeline spans a decade, then you shall not give up at the first sign of loss. Stick to the fundamental analysis. Be consistent!
Step 3: Change Your Mindset
Instead of brewing negative feelings at the market drops, change your perspective. Grab the opportunity to purchase more blue-chip stocks at a cheaper price. A blue-chip stocks come from a well-established companies that have been in the business for many years. These companies include BDO (Banco De Oro) and ALI (Ayala Land, Inc.). Buy these stocks for a lower price and sell them high!
For instance, PLDT (TEL:PS) was traded as high as PHP 3,074 last March 2015. However, it dropped to PHP 2,560 on August 2015. This was the perfect timing for “buy and sell” investors to acquire stocks from the leading telecommunications provider PLDT.
Step 4: Take a Deep Breath
The stock market is a great tool for your money to prosper, but the returns are not guaranteed. I entered the stock market with a small percentage of my wealth. As I became more confident, I invested a larger percentage. The market took a tumble every now and then. So, I simply take a deep breath.
Every move you make should be aligned with your investment strategy and financial goal. Relax. Do not let your emotions get in the way of success!