Reviving My Equity Investments

In line with the Hierarchy of Financial Needs, my plan was to funnel most of my free money towards completing our emergency funds, with a side goal of setting aside some funds too to make a payment chunk towards our mortgage balance. But with the stock index falling even further due to the pandemic, I couldn't resist diverting some cash towards my long dormant stock portfolio to bring down the average price of my stocks.

My pre-pandemic portfolio contained shares from Cosco Capital (which owned Puregold and Office Warehouse among other businesses), First Philippine Holdings Corp (owned by the Lopez Group and with principal interests in clean and renewable energy and real estate), and Metropolitan Bank and Trust Company.

I chose those three companies because they seemed to provide real value to society (i.e. groceries, energy, real estate, and banking) so people would continue to patronize them and there would be no danger of them closing shop in the immediate future.

I also looked at the difference between their fair values and market price, with COL Financial coming up with their fair value, to make sure that I would get at least 20% gains when the market price became equal to the fair value.

Those were the only two factors I used in choosing individual stocks in my years as a sporadic investor.

But then I noticed that COSCO and FPH's share prices didn't seem to move as much as MBT's did. MBT's share price was exciting to look at, as it moved up and down on a regular basis. This was not so with COSCO and FPH's share prices which seemed nailed to the floor, way below their fair value. 

A little research showed that the answer lay in the number of trades those stocks did per day. COSCO and FPH would only be traded an average of 150-200 times per day, while MBT averages 2,000-3,000 trades per day. I soon found out that that was called trade volume.

So now my three factors for choosing individual stocks are: (1) nature of business; (2) difference between fair value and market price; and (3) trade volume.

But I doubt I'll be buying any new individual stocks soon because I want to pare down my portfolio to only include index funds (I chose First Metro Philippine Equity Exchange Traded Fund or FMETF) and MBT (my tried and tested stock). I have more or less given up on adding to my COSCO and FPH stash and will sell them the moment they reach their fair value or when can I can earn at least 10% income from their sale, whichever comes first.

I now utilize the peso cost averaging method and buy Php10,000.00 worth of FMETF or MBT stocks per month, depending on which one looks like a better deal (for now it's definitely MBT). But I also go beyond my monthly budget when there are bargains to be had, I'm very flexible that way.

My stock portfolio is my children's college education fund,* so the goal is to have between 2-3 million pesos there by the time they're of college age (11 and 15 years from now) to subsidize their tuition fees. If I continue buying a minimum of Php10,000.00 worth of FMETF shares per month and with average yearly stock returns of 7.5%, my money should grow to Php1.95M in 11 years and Php3.19M in 15 years.

Of course, all of these computations are not set in stone because I can increase my yearly contributions and the stock market will go through its usual peaks and valleys movements (that's why average lang yung 7.5% yearly returns), but what's certain is that consistently saving and investing will help you attain your financial goals in the long run.

This long post was just my way of saying that I'm investing in stocks again and that I'm happy about it :)

* I wrote more about my strategy for my kids' education fund here.
** Please like the Frugal Honey page on Facebook for post updates and relevant information for your own personal finance journey! 


Pinay Investor said…
Wow, I made that same table too for Macey's college fund. :) Pero plan pa lang. hehe. And I agree - saving and investing consistently will help us attain our financial goals in the long run.
Jillsabs said…
Kelangan na talaga magsimulang mag-ipon for our kids' college tuition fees kasi ang wild ng tuition fees ngayon pa lang! So imagine how much it will be when our elementary age kids reach college? #scared
Che said…
I only have 4-5 years to save up for my sister's college fund and I just started. I was not sure if it's the wisest idea to start by investing ₱10,000 a month considering that my timeframe is shorter, but that's what I did. I bought SMPH last month and I might add MBT this month to average down. My goal is ₱1M in 4 years. Everything just feels weird now considering our situation. I also feel conflicted sometimes, between investing for a future need and donating.
Jillsabs said…
Hi Che,

Unless the market goes on a sustained winning streak which is highly unlikely, I don't think investing 10k a month in equities will help you reach your 1M goal in 4 years. You should consider investing more when you have extra money.

I also felt the same guilt of being able to invest my money when a lot of people lost their jobs and couldn't feed themselves or their families. I spread my donations to as many causes as I could and I now buy directly from small sellers or farmers group.

Did that erase my guilt? Nope, not at all. But at least I feel more empowered now with the knowledge that my money is directly helping those who need help the most. And I continued to invest because the more I take care of my financial life, the more I can give.
Che said…
Thank you! That's a good way to look at it.

On ₱10,000/month, I agree. I plan on setting aside 80% of my 13th month pay for my sister's educational fund, I will also need to find ways to make more money.
Jillsabs said…
I hope your sister realizes how very lucky she is to have you :)

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