Reasons to Invest in 2011: Pot of Gold at the End of the 2011 Rainbow

PHISIX seemed to have started the wrong way for 2011. Instead of following where it left off in 2010, it started to go down and is threatening to hit a low support of 3600 (in reference to its high in 2010 at 4200ish). PHISIX's drop brought with it other financial institutions, after all, PHISIX has one of the greater influences in the Philippine economy.

Despite the sluggish start, 2011 is still a very optimistic year. In fact, 2011 is said to be a great year for investments. Many people get scared (some even panic) seeing the values go down and as soon as the market starts to go up they miss a great opportunity by staying in the sidelines thinking that the market will go down once again. The fluctuations are inevitable in the stock market, it cannot be avoided. Money is also in fluctuations.

Here are some reasons why 2011 is a great year to invest:

1.) Sell off is temporary. As I have mentioned, PHISIX strongly influences the Philippine economy and the financial institutions within it. The bearish behavior of PHISIX is a result of firms and individuals cashing out their gains after the steep 2010 climb. The sell offs are projected to end as early as late February or maybe the month of March. PHISIX is in a consolidation state as of the moment and a reversal might happen real soon (from going down to going up).

As soon as PHISIX starts to pick up the pace, expect other financial institutions to do as well. The sell off is an opportunity to buy cheap.

2.) Strong fundamentals of the Philippines. Statistics show that Philippines has a lesser Debt to GDP and Deficit to GDP than United States and the European area. In 2009, Philippines has 56.0% Debt to GDP while United States has 83.0% and the Euro area have 74.0%.

Philippines also has the higher growth forecasts in 2011 up to 2015 compared to United States and the Euro area. Philippines is projected to grow by 5.4% in 2011 in comparison to USA's 2.3% and Europe's 1.5%. In 2015, Philippines is expected to grow by 6.0% (in reference to 2010) while USA and Europe will have 2.6% and 1.7% growths respectively.

3.) Philippines is in the midst of an investment boom. Well developed countries have an investments in GDP rate of at least 30% to as high as 50%. Since 1991, the highest that the Philippines have gone was approximately 26% and went on a downtrend since then.

Right now, Philippines is resting on a 16% investment in GDP rate, almost half than the minimum number in well developed countries. What this rate tells us is that there is still a lot of room for growth.

From 2011-2016, (US) $17 Billion worth of public-private partnerships (PPP) are projected. In 2011 alone, 11 PPP projects are scheduled namely NAIA Expressway ($235 Million), LRT Line 1 Expansion ($170 Million), MRT-3 Expansion (P140 Million), LRT-1 South Extension ($700 Million), LRT Line 2 East Extension ($120 Million), Laguindingan Airport Construction ($28 Million), Cavite-Laguna Expressway ($262 Million), NLEX-SLEX Link ($467 Million), Panglao Airport ($120 Million), Puerto Princesa Airport ($97 Million), and Daraga Airport ($71 Million) all worth $2.41 Billion.

The economic recovery is not yet over in fact it said that it still hasn't reached its midpoint.

4.) Valuations are not expensive. Because the prices of stocks in the Philippine Stock Exchange are falling, people could invest in bargain price. The current price values of stocks doesn't reflect the real value of the company or the stocks themselves and most of them are undervalued right now. They are cheap and they've got a lot of room to grow.

Investments carry risk with it but risk could be minimized. The greatest risk in investing is not doing anything at all and playing safe thinking that you might lose your money. The financial industry is projected to do very well as soon as PHISIX resumes an uptrend so shop around for mutual funds, UITFs, bonds, and stocks because they will definitely do good in the next few months. Though other sectors are expected to do good as well, these investment opportunities in the financial industry are way simpler and convenient compared to other investment opportunities. Quite ideal for a typical Juan.

Patience is Money

In contrary to what most people would suggest that this is the best time to invest in mutual funds because the NAVPS is going down, obviously, the facts say other things. The chart below shows that PHISIX continues to sink and today it was worse than most people could think. PHISIX dropped by 105.06 points or -2.73% to 3,738.31. PHISIX is projected to drop down to as low as 3,600 before it bounces back and 138.31 points is still a long way to go. If PHISIX will drop approximately 140 points, that is a significant drop in mutual funds NAVPS.

Though mutual fund companies invest in other securities such as bonds, a large chunk of their portfolio belongs to the stock market (maybe even more than FOREX). Mutual fund companies invest/trade millions in a particular stock and by millions I mean tens or even hundreds of millions. So if the market goes down, a large part of the mutual funds' portfolio goes down as well, thus it makes some perfect sense as to why the NAVPS goes down with the PHISIX.

Apparently, this is a situation where "time" is not your ally in investing but rather "timing". Why timing? Here's an illustration about time vs timing:

Person A and person B both have P50,000 to invest. Person A thinks that the earlier he invests, the greater his gains is going to be so he didn't care about the market status and went on to invest on a mutual fund company for a NAVPS worth P5 per share. Person B on the other hand thinks that both time and timing are essential thus he studied the market behavior and waited patiently for his entry. Person B knows that PHISIX is sinking and all technical analysis, fundamentals, and sentiments aren't looking good so he kept his hard earned money at hand and timed his opportunity. A month later, PHISIX showed some signs of life and Person B invested on the same mutual fund as Person A did but for NAVPS that is now worth P4.50.

So who got more? Person A invested P50,000 at P5 per share and got 10,000 shares, person B who timed his entry invested the same amount but at P4.50 per share and got 11,111 shares. Assuming that the NAVPS went up to P10 per share after 10 years and both never added any amount to their investments, Person A will get P100,000 or doubled his money. Person B on the other hand gets P111,110 after 10 years.

Why did investing without timing work against Person A? Because during the time that the market went down his investments never grew and in fact it lost some of it's value. Of course optimism and conventional knowledge will tell that it will recover and grow in time but in comparison to Person B, Person A got lesser shares for the same amount (you want more shares at cheaper price don't you?). Realize what difference timing could make?

Be a little patient. You don't have to be an expert in reading/interpreting/analyzing charts or know each and every news there is. A little diligence and effort is more than enough. Give the market some of your time, effort, and attention and it will become your friend. It will significantly increase your odds.

PHISIX: Good Times Ahead?

From an Elliott Wave Theory analysis point of view, the Philippine Stock Exchange Index (PHISIX) is wave 5 bound sooner or later. Elliott Wave Theory says that it takes five waves for the market to reverse it's trend, three waves going the direction of the trend while two going reverse.

The chart below shows that PHISIX is already in wave 4 (from 2009 reference) and should the trend continue, wave five is just around the corner. The two boxes are the two uptrends (value of PHISIX going up) and those that are encircled are reversal points where the value of PHISIX stopped going down and resumed an uptrend.

The second circle (right side) signifies that PHISIX is already on a downtrend (value of PHISIX going down) and according to Elliott Wave Theory, this is the fourth wave.

How significant is wave 4? Wave 4 signifies that a corrective wave is coming sooner or later thus PHISIX will once again start to go up. This is a time for traders and investors alike to keep a very close eye on the market because PHISIX will start to go up once again in no time.

However, be a little bit cautious as some bad news are looming around the corner. London based Barclays Capital reported that RP's inflation rate might exceed 4.5% by 2011, not a really good value if you ask me. It might make investors cover because it will make the value of their investments smaller.

Summing it up, PHISIX looks promising technically but it will take a matter of time to see if bad news could shake it fundamentally. Be a little more patient and vigilant. Good times could just be around the corner and it brings with it some serious growth and by serious, that means somewhere around 40% to as far as 100% for the year.

How Deep Will PHISIX Go?

Apparently the reported 7.3% GDP and 7.2% GNP of the Philippines didn't help. PHISIX continues to go down amidst the positive news. The series of bad news (Makati bus bombing, China's inflation rate at 3.3%, and the chaos at Egypt) have done more damage than the positive news of the Philippine economy.

The graph below shows that PHISIX has already broken its somewhat strong uptrend support at 4000.

Encircled is supposed to be PHISIX's uptrend support at 4000 which was broken early January. Several supports were pegged but to no avail, PHISIX continues to dive deep.

BDO projected that PHISIX might go down to as low as 3600 for the year. 3600 is a really deep dive but with the looks of it, there is a very strong chance.

Now what if PHISIX sinks down to 3600, is it a good thing or bad? It's good if you ask me. PHISIX being down means other stocks are down, their values are cheaper (the value of stocks brings PHISIX down in the first place). It cuts in all angles for everybody because:

[1] It gives the perfect entry to the stock market. Stocks are cheap hence more volume could be bought.

[2] It gives traders and investors an opportunity to cover their losses when PHISIX went down.

[3] It gives a better room for growth. The deeper the hole, the higher the climb. 3600 is deep and there's a long way to go up.

How far will PHISIX continue to go? Nobody knows. But as far as the market behavior is concerned, it will continue to go down. Now is not the right time to invest. Experienced traders and investors say that late February or the month of March is a very good time to invest or trade. It's wise to take such advise.