Monday, March 18, 2013

STOCK MARKET: Don't Interrupt the Compounding

One of the benefits of being a TrulyRichClub Member is we got to receive a Bi-monthly Stock Update from Bro. Bo Sanchez and Mike Viñas.

I would just like to share some parts of the Stock Update with you.

If You Withdraw P50,000 Today, You’re Withdrawing P1 Million Tomorrow.

Oh, I know it’s tempting.
When the stock market is growing sweetly (like now), it’s sooooo tempting to withdraw “just a little bit” for 
that new ladies’ watch. Or a Hong Kong vacation. Or a birthday party in Boracay.

As much as possible, DON’T.
If you withdraw, you’re interrupting your compounding—the greatest mathematical force in the universe.
Let me give you an example…
Johnny saw that in a span of 18 months, his stock market fund has already grown from P100,000 to P150,000. 
He’s ecstatic. He’s thanking God. He’s inviting friends to join him at the TrulyRich Club. (Very good!) He’s 

dancing the gangnam dance.

But then one day, while walking in a mall, Johnny sees this really nice “spaceship-looking” gizmo that 
functions as a cellphone/coffeemaker/vacuum cleaner all rolled into one. It can make phone calls. It can make 

coffee. It can clean your house. It’s astounding. (Okay, I’m exaggerating. But I’m simply saying that there’ll be 
temptations out there that are very real.)

The price? P50,000.
Definitely not in Johnny’s budget. Unless…
He thinks of his stock market investments.
He’s got the money.
He decides to go for it!
He withdraws P50,000 from his stocks and buys the gizmo. He can now talk to his girlfriend and make 
coffee and suck dust from the living room’s carpet.

Question: Did he really withdraw P50,000 only?
In 20 years, if his stock market investments grew by 16 percent a year, his total money would be LESSER 
by P1 Million.

Why? Because he interrupted the compounding.
I’m not kidding. Compute it yourself.
I urge you: Avoid withdrawing from your stock market investments.
If you feel tempted, just remind yourself: “When I withdraw P50,000 today, I’m actually withdrawing P1 
Million tomorrow.”

May your dreams come true,
Bo Sanchez

This is just the 1st part of the stock update. The second part is an update from Mike. The title of his article is "Stock Market Success Does Not Require Market Timing". He said that it is possible to make good money in the market without having to consider timing by following the Four (4) Strategies below:

1. Use Long Term Money - Invest only the money that you will not need in the near future.
2. Buy Regularly at Buy Below Price - Buy every month or every quarter but ensure that it is at our Buy Below Price.
3. Use Peso Cost Averagingbuying shares with a fixed amount of money on a regular basis (as mentioned in # 2). The advantage to this strategy is that it makes investing more affordable and it takes emotions out of investing.
4. Add Some Stocks with High Dividend Yield - Choose stocks whose earnings are not expected to drop and have capital appreciation potential. In our case it is MER. It's dividend yield of 3%.

Mike also discussed more news and details on MER and DNL to explain why these stocks were chosen to be in our SAM list.

Aside from the 2 articles of Bro. Bo and Mike, they are also sending an updated list of our SAM table for the BUY Below Price, TARGET Price and Action to TAKE in case there are changes.

By the way, the STOCK Market today is so exciting. It is having a slight correction. As investors, we like it when stocks go down so that we can all buy at cheaper price. But no one knows the market and to be safe, better to START NOW and follow the 4 strategies given by Mike or better yet be more educated and get REAL-TIME Stock Alerts from Bro. Bo by joining the TrulyRichClub.

~ May our dreams come true.
Cheers to PSEi being at 10,000 soon! :)

1 comment:

Carlos said...

Technically, it's not really compounding. But I do agree that it's very important to invest long term. It's very rewarding.