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.

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.

Mutual Funds: When is the Best Time to Invest?

"When is the best time to invest?". It is a question that I hear almost everyday mostly from people who either are investing in mutual funds or are planning to invest in one.

The idea of cost averaging have captivated many people and in fact it has fostered the mindset that "anytime" is the right time to invest. But for me, cost averaging is not enough.

In cost averaging, time is the most important part in investing. The earlier you start, the lesser the risk, and the greater the chances of the returns. However, cost averaging says nothing about entries and exits which in my opinion are very important. Time and timing are actually the keys in making a successful trade and investment if you want to maximize your profits.

Cost averaging is nothing more than speculation. It is no different in depositing in a savings account. Speculation if you ask me is not investing, it is investing blindly. Though it's true that mutual funds offer way better interests/gains than bank deposits, be aware that mutual funds are investments and investments needs investigation, not speculation.

So going back to the question "when is the best time to invest?", my answer is wait until PHISIX hits a low or in a technical lingo, a support. The Philippine Stock Exchange heavily influences financial institutions in the Philippines be it stocks, bonds, and other forms of securities. If the PHISIX (Philippine Stock Market Index) goes down, almost everything goes down as well.

As of this moment, PHISIX is going down and breaking supports. How low will it go, we still don't know. PHISIX have already broken the 4000 support and is heading down to 3800. The bombing incident in Makati, China's reported 3.3% inflation rate, and the turmoil in Egypt are not helping thus we could expect PHISIX to go further down.

In the graph below, the straight line shows the support that PHISIX is resting to as of the moment. It is inclining going down thus it is indeed going down. So is "anytime" the best time to invest? The chart says otherwise. Does it make sense to invest into something that is going down? I don't think so. Wait for it to hit it's lowest and reverse. You want a bargain don't you? A stock at it's cheapest and more volume?

The lines in the two boxes (next graph) is PHISIX's performance for the past two years. Elliot's Wave Theory says that before a major reversal, a stock goes through 5 waves. The boxed data shows that PHISIX have already gone through waves one to four and wave 5 is possibly coming. Is it good news? Yes indeed. Wave 5 is an uptrend but when will it happen? We don't know. The downtrend could continue and a reversal could happen anytime.

The third graph shows PHISIX's performance from 2002 to 2010. As far as the graph is concerned, PHISIX is still on it's long term uptrend on wave 3 meaning that there is still a lot more room to grow. Wave 2 (downtrend) happened during the so called economic crisis. What comes down always comes back up so after the big dip in 2008, that gave a lot of height to climb in the following years. PhilEquity rode PHISIX's wave 1 as well as the steep climb after the economic meltdown. It's NAVPS grew from barely a peso in 1995 to about P20 in 2010, roughly 2000% increase in 15 years.

Knowing the market behavior is essential in investing. It eliminates false hopes that the market is going up and much more, take away the idea that mutual funds are some sort of magic wand that could give instant riches long term. Knowing that PHISIX is bound to reach greater heights in the years to come is not much of our concern as of the moment. What we should know is when to time our entry to have a good chance of gaining more. Never trade/invest against the trend, you can never outsmart the market.