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Third Side of the Coin

As a self-proclaimed bounce specialist, or how my teammates like to call me, “bounzerizt,” most traders ask me, “Sir how can you be so good at picking the bottoms? What is the secret?”

To the best of my knowledge, I don’t have any. What you know about trading more times than not are the same things that I know. See, I don’t really consider too much variables before I enter a trade. When I see a signal, I execute with no questions asked. People who know me always hear me say, “execute now, ask questions later.” because that’s how I think it should be, trading without hesitation.

My philosophy is this: fundamentals don’t necessarily matter, technicals don’t necessarily matter. What matters is the crowd psychology manifested through price action.

Cliché as it may seem, but I believe that Price Action is King. Some of you may argue, “isn’t price action a part of technical analysis?” and I would respond, “I don’t think so.”

Technical Analysis for me falls under the belly of price action and not the other way around. Phrasing it this way makes it clear that price action towers over technical analysis.

I know you think that sounded weird but don’t worry, most people do. My thoughts have always been plagued by criticism and skepticism not only from beginners but also from experts in the field. The very main reason is the counter-intuitiveness and seemingly illogical ideas that I present. Most of the ideas I say contradict common knowledge yet agreeing with it at the same time. I don’t have any words, but I think this may describe it lightly—paradoxical.

Now, going back, how the heck do fundamentals and technicals seem to not matter in my eyes? Let me tell you what I think about them.

Fundamental Analysis or Fundamentals is anchored to the idea of valuations. Using balance sheets, cash flows, or whatever, fundamental analysis aims to give intrinsic value to the company. The calculated “value” of the company then gives the analysts an idea of the cheapness or expensiveness of a stock.

On the other side, we have Technical Analysis or Technicals. Technical Analysts use various mathematical indicators like RSI, Stochastics, Moving Averages, and artistic models like, Harmonics, Elliott Waves, etc. to tell whether the price will go up or down in the future.

You might ask what kind of trader am I between the two—I am neither.

See, both fundamentals and technicals suffer the same fate. They aim to PREDICT what is about to happen, they predict future prices of stocks based on their calculations. They are trapped in the future where they think price will be. They seem to be disconnected from the present moment. 

“WhAt dO yoU uSe Th3n?!”

What I have for you is a third kind of analysis that differs significantly from the two. What I propose is price action trading—understanding the psychology of the crowd.

Contrary to both Fundamentals and Technicals, Price action trading anchors to the idea that the current price is the only true price. Anything before or after that, have no significance whatsoever. The idea is to NOT think about the future price, but rather to accept that what you see is the only truth and that you have no control over what will happen next. What you only know is what it currently does. This removes the disconnect from your mind on what the price SHOULD BE and where it’s currently at.

Price action analysis deals with the collective behavior of the market participants, being in synch with the market at any instance. To not think about the future or the past. To be present in the moment. To enjoy, feel, and taste every bit of the movement. To have an intimate relationship with price. To be one with the market.

Knowing that you don’t have to know is one of the greatest discoveries I had, and it changed me forever. 

That for me is the third side of the coin. Both fundamentals and technicals have long been crowned as the only types of analyses there are. I think it’s time to honor the third side of the coin, the price action. And call for a separate study of it, divulging from its commonality with technical analysis.

Price action trading gives you insights about the behavior of the crowd behind the movement. The fear, the greed, the denial, the despair behind the price. Technical analysis just fails to do that.

To end, I would like to give you a quote that I think most of the traders reading this would need to ponder upon.

“It is not that we know too little, it is because we know too much.”

Think about it for a moment, do you really think you know too little? Or are you just learning too many at the same time?

Lessen your analysis and focus on price. Who knows what things you’ll uncover?

Contributor:

Full Name: Geyzson Kristoffer S. Homena
Investagrams username: @GeyzsonKristoffer

Channels:
Investa: bit.ly/GeyzsonKristoffer_Investa

Facebook: bit.ly/GeyzsonKristoffer_FB

YouTube: bit.ly/GeyzsonKristoffer_YT

About the Contributor:

An Applied Mathematics graduate and a full-time teacher, Geyzson Kristoffer is a part-time trader who has been an active user of Investagrams since 2017. He spends his mornings, afternoons, and evenings learning about trading and reading books: Alexander Elder’s Trading for a Living being his favorite. Cohering to his passion and profession, he set his heart on teaching and helping newbies, but only the dedicated ones.

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Which Equity Mutual Fund Is For You?

First things first, what is an equity mutual fund? An equity fund, also known as stock funds, is a mutual fund that invests principally in stocks. The fund manager tries to offer great returns by spreading the investment across companies from different sectors or with varying market capitalizations.

Typically, equity funds are known to generate better returns than term deposits or debt-based funds but there is still a considerable amount of risk associated with these funds since their performance depends on various market conditions. Without further ado, here are the different types of equity mutual funds.

INVESTMENT STRATEGY-BASED CATEGORIZATION

Sectoral Fund

Also known as a theme fund, sector funds follow a specific investment theme like an international theme or local theme. Some themes might also invest in a particular sector of the market like technology or pharmaceutical. It is important to note that these funds carry a higher risk since they focus on a specific sector or theme.

Contra Equity Fund

As the name suggests, contra equity funds follow a contrarian or nonconformist strategy of investing. These equity funds analyze the market to find under-performing stocks and purchase them at low prices. This would be under the assumption that these stocks will recover in the long term.

MARKET CAPITALIZATION-BASED CATEGORIZATION

Large-Cap Fund

Typically, the large-cap fund invests a minimum of 80% of the investment in equity shares of the top 100 countries according to market capitalization. This strategy is considered to be more stable than the mid-cap and small-cap focused funds.

Mid-Cap Fund

Mid-cap funds invest around 65% of the total assets in equity shares of the top 101 to 250 companies according to market capitalization. These schemes tend to offer better returns than the large-cap strategy but tend to also become more volatile.

Small-Cap Fund

Considered the most volatile out of the three, the small-cap fund invests about 65% of the asset in equity shares of companies ranking 251 and below according to market capitalization. If done right, small-cap funds tend to offer the most returns compared to large-cap and mid-cap funds.

Multi-Cap Fund

Multi-cap funds usually invest in a mix of equity shares from large-cap, mid-cap, and small-cap companies in varying proportions. With this type of fund, the fund manager keeps rebalancing the portfolio to match the market and economic conditions as well as the investment objective of the scheme.

INVESTMENT STYLE-BASED CATEGORIZATION

Active Fund

These schemes are actively managed by the fund managers who handpick the stocks that they want to invest in.

Passive Fund

Passive funds usually track a market index which determines the list of stock that the scheme will invest in. Unlike active funds, this strategy does not require the fund manager to have an active role in the selection of the stocks.

Now, the choice is yours, Ka-Investa. Do you want to get into Mutual Funds? If yes, which one would you like to explore on?

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Top Long-Term Investments

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” — Robert Kiyosaki

Long-term investments refer to saving for an extended period of time. The range for long-term investments can be at least 10 years or more. The goal of long-term investments is mainly for big-picture costs such as retirement or for the future generation.

Often, long-term investors will use the buy and hold strategy where selected investments are purchased but not significantly changed for up to several years or more. Here are some great options for long-term investments.

MUTUAL FUNDS

With so many different types of mutual funds, the ideal mutual fund of long-term investors is stock mutual funds. Stock mutual funds, especially growth stock funds and aggressive growth stock funds, are suitable because they have historically achieved higher average rates of return than other investing and saving vehicles. Many long-term investors also like to invest in index funds for their low cost and their tendency to average good returns over long periods.

REAL ESTATE

All over the world, real estate is considered one of the safest sectors to invest in. The greatest appeal of real estate is that it doesn’t require any special skills. If you look at it from a statistics standpoint, the population is growing while the supply of land stays the same. Because of that, the demand will continue to grow meaning the returns from real estate will also continue to yield great returns in the long term.

INSURANCE

Like mutual funds, there are many great options of insurance both in short term and the long term. Life insurance is the most common type because it provides a measure of security for your loved ones. When deciding whether life insurance is a good investment, it’s important to understand that the variations of insurance plans generally fall into two categories, permanent, and term.

Because term life is designed to cover you for a set term, they are typically less expensive than permanent life insurance premiums. Because term life is designed to cover you for a set term, they are typically less expensive and more flexible than permanent life insurance.

STOCKS

The main reason to buy and hold stocks over the long term is that long-term investments almost always outperform the market when investors time their investments correctly. It isn’t unusual for stocks to drop 10% or 20% over a shorter period of time but riding out temporary market downswings is considered a sign of a good investor.

It is important to note that stocks rise and fall every day so knowledge of the companies you invest in would be key to looking at high returns. Compared to other investments like real estate, trading in stocks is still considered a risky game and requires a significant number of skills to be learned to truly master stock trading.

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Is Your Insurance Policy Right For You? (Part 2)

Although we can’t predict the future, we can protect ourselves if something unexpected were to happen. Insurance is meant to safeguard us from fortuitous events financially. Here are some insurance options you’ll want to look into and purchase.

Life Insurance

This is considered the most common type of insurance where you pay premiums to receive protection in case you pass away. The greatest benefits of life insurance include the ability to cover your funeral expenses as well as provide for your beneficiaries. Within life insurance, there are multiple types of policies to choose from. The two basic types are traditional whole life and term life. Traditional whole life is used as an income tool and an insurance investment. Term life insurance, on the other hand, is a policy that covers you for a set amount of time.

Health Insurance

Health insurance typically pays or helps pay for medical, surgical, and sometimes even dental expenses. This can cover you and your immediate family to be able to pay less on check-ups or in case someone gets hospitalized. The Philippine government actually has universal health coverage, PhilHealth, that Filipinos are entitled to.

Educational Insurance

As the name suggests, this type of insurance can cover education fees. With the inflation of tuition fees, educational insurance lets you save money in advance. The money you put in will be invested by your policyholder and can be cashed out for tuition payments, school allowances, and other educational expenses. Educational insurance can be started as early as possible to get the best prices.

Vehicle Insurance

When buying a car, motorcycle, or any type of vehicle, it’s important to also buy insurance that will cover that investment. This insurance can offer reassurance in case you get into an accident, your vehicle gets stolen, vandalized, or damaged by a natural disaster. There are two types of vehicle insurance you’ll need to consider. Compulsory Third Party Liability (CTPL), the most basic and least expensive car insurance in the Philippines, is not only government-mandated but also covers the interest of the third party in the event of an accident. Comprehensive Car Insurance (Compre) is not mandatory but is highly recommended because this protects you, your cars, and your passengers.

Property Insurance

Property insurance is a broad term for a series of policies needed for property protection coverage. Within property insurance includes policies like renters insurance, flood insurance, and earthquake insurance. This is needed for cases such as fire, floods, earthquakes, and theft. This type of insurance gives you coverage of your house and the furniture inside.

Travel Insurance

Got the travel bug lately? Well, before you book the ticket or board the plane, don’t forget that there’s insurance for that too. Travel insurance gives you traveling protection locally and abroad. In case you lose your luggage, have a delay in your flight, and run into accidents while traveling, this insurance will come in handy.

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Busy for Trading? This is the key!

“Saka na ko mag-iinvest, kapag ‘di na busy.”

Isa sa pinakamalaking dahilan kung bakit ang komplikado at overwhelming ng pag-iinvest ay dahil napakarami nating options. From stocks and bonds, to real estate or money markets — madalas natin marinig ang mga ito; pero mahirap pumili kung ano ang makakapag-guarantee sa atin ng good returns. Plus, madami sa atin ay busy sa work, kaya hindi tayo makahanap ng oras para mag-aral ng mga ito.

Pero ka-Investa, what if we tell you: pwede ka na mag-invest nang hindi naglalaan ng napakalaking oras at effort through mutual funds? 

“Pero paano ba ako magsisimula?” “Mutual funds? Ano ba yan?”

Essentially, mag-aambag ka lang, kikita ka na. No joke.

Nagwowork kasi ang mutual funds sa pamamagitan ng pagtitipon tipon ng pera ng mga investors. Ang funds na natipon ay siyang i-iinvest sa mga assets tulad ng stocks, bonds, money market, at iba pa. 

“Ha, so paano ko mahahawakan ang pera ko?”

Good question, ka-Investa! Ito actually ang rason bakit swak ang mutual funds sa mga busy na tao — ang pera sa mutual funds ay hinahandle ng professional fund managers. Sila ang bahala sa pagpapalago, at ginagawa nila ito sa pamamagitan ng pag-iinvest sa iba’t ibang nasabing securities. 

Ngayon, ang tanong mo siguro: “paano ba ako kikita?”

Kapag tumataas ang value ng mga securities ng mutual funds, dito ka ngayon kikita. Sa madaling salita, kapag may mutual fund account ka, nagiging part-owner ka ng mga investment securities ng mutual funds. Kaya’t kapag kumita ang mga securities na ito, ikaw din ay kumikita.

Ngunit shempre, gaya ng ibang investments, may risk din ang mutual funds dahil nag-flufluctuate ang value ng investments.

At shempre, kailangan alam pa rin natin kung ano ba talaga ang goals ng investment natin. 

“Long-term o short-term investment ba ito?” ”Kailangan ko ba ang pera, if in case may emergency?” Ilan ito sa mga tanong na kailangan mo sagutin bago ka mag-invest. 

Lagi natin tatadaan na walang 100% sure return, ngunit malaki ang possibility na kumita tayo kung alam natin ang objectives natin, at pinaplano natin ito.

Pero at the end of the day, ang maganda sa mutual funds ay pwede ka mag-diversify, at kapag bumaba ang value ng isang stock, maliit lamang ang epekto nito dahil diversified ang portfolio. Kaya in the long-run, pwedeng masabi na sustainable ang mutual funds.

Ka-Investa, kung may oras tayo mag-scroll sa social media, then dapat kaya din natin mag-laan ng oras sa pag-iinvest. Kailangan lang natin alamin kung saan tayo magsisimula.

Kung nagustuhan mo ang article na ito, don’t worry kasi marami pa kaming i-rerelease tungkol sa mutual funds and investing. Mananatili kaming andito, hangga’t matulungan namin ang lahat ng Pilipino sa kanilang investment journey.

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Is Your Insurance Policy Right For You?

In the Philippines, insurance could be synonymous to VUL. But did you know that this kind of insurance could not be fit for your needs? There are many other types of insurance policies that you could choose from and that could better serve your needs and your capability to pay.

Before you invest your hard-earned money into insurance, take note of these different types of insurance policies so you could really maximize their benefits.

Term Life Insurance

Term Life Insurance requires the policyholder to pay premiums and guarantees payments to his/her beneficiaries if the policyholder dies during a specified term. The specified term is offered at a range to best fit the policyholder. There are level term policies that cover 10 to 30 years and a yearly renewable term policy that can be renewed every year as the premiums change.

Term life premiums are based on a person’s age, health, and life expectancy. In most cases, there will be a required medical exam to determine these factors. This policy promises death benefits but features no saving components. Because a benefit is only offered in a specified term and provides no saving components, term life insurances are usually the least costly life insurance available. 

Whole Life Insurance

Also known as the “traditional” life insurance, whole life insurance provides permanent death benefit coverage for the policyholder. Besides the death benefit coverage, whole life insurance also contains a savings component where the initial cash value can accumulate.

This savings component can be invested and is accessible to the policyholder to withdraw or borrow when needed. Over time, the interest earned on the policy will often provide a positive return to investors growing their money larger than the total amount of premiums paid.

Universal Life Insurance

Just like whole life insurance, universal life insurance is a type of permanent life insurance with an investment savings element and low premiums. This insurance option provides more flexibility than whole life insurance since policyholders can adjust their premiums and death benefits. Universal life insurance premiums consist of two components, the cost of insurance amount (COI) and a saving component also known as cash value.

As the name suggests, the cost of the insurance amount is the minimum amount of premium payment to keep the policy alive including the charges for mortality, policy administration, and other expenses. This will vary based on the policyholder’s age, insurability, and the insured risk amount. Excess premiums will be accumulated within the cash value portion. Over time, the cost of insurance will increase but if sufficient, the cash value can cover the increased costs.

Variable Life Insurance

Variable life insurance is an insurance policy where the payout amounts are determined by the performance of the underlying securities in the policy. Like in the market, variable policies will return more when the market is up and less if the market is down. Because of this, the variable life insurance policy is considered much more volatile than other life insurance policies and is only ideal for those who are willing to take on that additional risk.

Which one of these would you like to explore on? Do you think getting an insurance would be beneficial to you at all? Comment down your thoughts, Ka-Investa!

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Why You Need to Diversify Your Portfolio Now

Ever heard of the term diversification? A common phrase heard in the financial world is “diversify your portfolio”. Many have heard it and the next phrase would come up, “is it important?” It’s actually key for most financial successes. So, let us explain why.

Diversification is the practice of spreading your investments around so that your exposure to one type of asset is limited. Essentially, if you have your money all-around, you’ll be able to cushion yourself for riskier investments with safer ones. By diversifying your portfolio, your risk and reward in your investment portfolio would be more balanced.

It reduces risk and is designed to help reduce the volatility of your portfolio over time. Most investment professionals agree that diversification is the most important component of reaching long-range investment goals while also minimizing risk.

Balancing a diversified portfolio may be complicated and expensive but there are many options to widen your diversification without having a difficult time. These options are specially designed for beginners or for people who would like to be more hands-off with their portfolio.

A great example would be found in mutual funds. There are so many choices to mutual funds to fit your preferences, goals, and needs. By investing in mutual funds like real estate funds, sector funds, and commodity-focused funds, you will instantly have a diversified portfolio.

Because market risk is generally unavoidable, diversification is a great way to soften the blow. In practical terms, diversification is holding investments that will react differently to the same market or economic event. Being able to invest in different assets reduces the consequences of a wrong forecast. This is very important in investing because markets can be volatile and unpredictable.

With this practice, you’ll be able to spread your risk across different types of investments, the goal being to increase your odds of investment success.

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