LABOR MONTH PACKAGE 4: The Strategic Averaging Method

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By Violeta Depalog / May 27, 2016

For the past 3 consecutive Saturdays, we’ve been unpacking the contents of our Labor Month Package.




After familiarizing ourselves with a stock market portfolio, the importance of diversification to starting investors and the difference of investing and trading, we will now open the last content of our package this last Saturday of May.

As our finale, I’ll be sharing a strategy to help you maximize your earnings while minimizing your loses in your stock market investment. Brace yourself for the Strategic Averaging Method that I have also been practicing since I have entered the Stock Market. But before we continue, I would like to give a proper credit to Bo Sanchez who introduced this strategy to his Truly Rich Club members who are continually reaping the fruit of this blessing.

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What is the Strategic Averaging Method?

In following the Strategic Averaging Method, there are two terms you need to get to know. They are: Buy Below Price and Target Price.

Buy Below Price refers to the “set price” that serves as your warning to stop buying shares of your company of choice for a greater possibility of higher returns of your investment.

Target Price refers to the “specified price” that indicates a good position to sell your ownership (shares).

 

How does the Strategic Averaging Method work?

While the price per company’s share does not reach the Buy Below Price, you keep purchasing shares gradually. Once it reaches the Buy Below Price, stop buying and hold your position until it reaches the Target Price. Once the Target Price is reached, you now sell your shares of stocks, then use the money to purchase another company. The cycle goes again and again as your money grows one step at a time.

We’ll take the sample table below to illustrate how this strategy works.

Example:

SAM1

Based from the table above, company ABC sells its shares at 10 Pesos per share. It has a Buy Below Price of 14.10 Pesos per share and a Target Price of 18.21 Pesos per share.




Question: What will I do with my shares of stocks at ABC? Should I continue buying, stop buying, hold, or sell?

Answer: You may continue buying since the price does not reach the buy below price.

Question: When will I stop buying shares of company ABC?

Answer: You should stop when the price reaches or exceeds the Buy Below Price of 14.10 Pesos.

Question: When can I sell to reap the return of my investment in company ABC?

Answer: When company ABC reaches the Target Price of 18.21 Pesos.

Do you know what to do with your shares of stocks at company XYZ and EFG?

I’m sure you can answer this correctly with your eyes closed.

 

Where to Possibly Find the Buy Below Price and the Target Price?

For Newbies this can be seen on your online broker’s website in its Fundamental analysis.

For the Truly Rich Club members, Bo Sanchez provides them with recommended stocks with the recommended Buy Below Price and the Target Price.

For others who are already attuned with the stock market, they can set their own Buy Below and Target Price.

 

The Difference of your online broker’s Recommendation with the Truly Rich Club’s?

As newbies, you need guidelines to start with your investment. Your online broker or the Truly Rich Club are one of the best choices you can follow.

The online broker’s recommendation lists several number of companies from different sectors and updates are given within weeks or months. Choose the best performing companies to invest  on is up to the investors’ discretion. Also, once you already have an online broker account, you can always get this information for free.




The Truly Rich Club on the other hand, recommends selected well performing companies with the list of price per share, Buy Below Price, Target Price which are updated every six hours, every day during market days, from Mondays to Fridays except for holidays. The Club also provides its members Stock Alerts on immediate recommendations on the selected stocks or if there are additional companies that investors can invest their money on. In short, the Truly Rich Club guides its members on every step to reach their financial goals, but because this is a very special treatment from the club, this entails a minimal fee.

To sum up, the Strategic Averaging Method needs a set of Buy Below Prices and Target Prices of shares of stocks of desired companies. For Newbies, there are sources that you can make use of to find these data. However, as a word of caution, the Strategic Averaging Method needs strong discipline and patience in order for your investment to succeed.

 

P.S. 1: Thank you for rooting for this series of the Labor Month Package. Please come back again for more blogs on saving and investing in the Philippine stock market.

P.S. 2: If you liked this post, please feel free to share it with your friends. In the meantime, I invite you to join our subscription list to download your free e-book, How Did I Enter into the Philippine Stock Market-Mt step by step guide. The subscription form is just at the right side of this page.

P.S. 3: You can also visit the Truly Rich Club, listen to Bo Sanchez’ message on why we need to invest and to learn more about SAM (Strategic Averaging Method) by clicking here. You may also join the club if you are interested.


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