You have been told to buy mutual funds or an equity index fund just because you’re a newbie investor or a busy person.
You have been told to do peso-cost averaging method or follow the Buy Below Price of your broker just because you’re a long-term investor.
These pieces of advice are good until you learned about our Smart Index Investing Strategy.
It’s your better option than mutual funds, equity index fund, peso-cost averaging or Buy Below Price EVEN IF you’re a newbie or a busy person.
Better means being more strategic and logical than those who buy mutual funds or an equity index fund.
Better means having a bigger earning potential than those who follow the peso-cost averaging or those who buy for as long as the price is below the Buy Below Price.
There are pre-determined stocks in the fund’s basket when you buy a mutual fund or an equity index fund.
Did you know that you cannot tell the fund manager to remove certain stocks in the basket when you buy a mutual fund or an equity index fund?
“They told me that a professional fund manager is taking care of the entire fund. He must know what he’s doing, right? Why would I want certain stocks to be removed from the basket then? What are the odds of seeing stocks in the basket that I do not like?” perhaps you ask.
If you are a supporter of green renewable energy, you do not want to see companies included in your mutual fund or equity index fund that do more harm than good to the environment.
Moreover, you do not want to see a company in your mutual fund or equity index fund that has been in the downtrend channel for an X number years, especially if that company does not show any clear sign of reversals just yet. The poor price action of that company will drag the fund’s performance down.
Some financial advisors might justify that and tell you, “That scenario is factored in already. A mutual fund or an equity index fund is well-diversified. The good apples will neutralize the impact of the bad ones.”
For your information, you can diversify without blindly allowing bad apples in your stock portfolio.
You already know that one or two stocks are already dragging your entire portfolio’s score down.
It’s happening right before your eyes.
Doesn’t it make sense to weed those stocks out right away instead of justifying it by saying that the other stocks in the mutual fund or equity index fund are performing well?
Then, they will tell you, “It’s okay to buy any dips since you’re into long-term investing. Technical corrections cannot change the fundamentals of a stock.”
We agree that technical corrections cannot change the fundamentals of a stock but there’s a problem with the phrase “buy any dips.” There goes the word “any” again.
You should not buy the current dip you’re seeing if the selling pressure has not reached its exhaustion level yet. Why hurry when it’s obvious that people are not yet done selling what they have decided to sell?
See these two scenarios.
Scenario 1: Buy whatever dips even if the selling pressure has not subsided yet.
Scenario 2: Wait some more. Entertain the idea of entering a new position or topping up on your portfolio once the selling pressure has weakened. This will allow you to buy more for less than the previous scenario.
Which scenario makes more sense? Of course, the second scenario is more logical than the first one.
You do not want to buy “any dips” when there’s an evaluation technique to know whether the decided sellers have already sold almost every share they wanted to sell.
From now on, drop the word “any” from your vocabulary.
Are we telling you to time the market?
This is only about being smart to know where to look, what to look for, and how to interpret what you’re looking at so you can invest better than those who accepted the plain vanilla advice of investing in a mutual fund or an equity index fund.
Take a deep breath for now.
Are you good? Because we’re not yet done telling you what most financial advisors don’t tell you.
Don’t blame all of them. Some of them are not aware of these things we’ve told you.