As the trading year comes to a close, the Philippine Stock Exchange Index (PSEi) is 22.66% up from the close of 2013.*
The PSEi serves as a benchmark for the overall performance of the country’s stock market. It is a capitalization-weighted index, with stocks representing the financial, mining, holding firms, industrial, properties, oil sectors, and services sectors of the PSE.
If you invested in an Index Fund or bought First Metro Philippine Equity Exchange Traded Fund, Inc (FMETF) – the Philippines very first ETF that tracks the performance of the PSEi, you would have almost the same return given this period.
At this point, 22.66% is an amazing return that beats out time deposits, savings accounts, bonds, and other traditional forms of investments.
Why buy PSEi?
You do not have to go through the rudiments of stock selection and timing when buying the PSEi – that is an advantage.
Numerous studies have shown that it could be a good passive way for you to let your money grow in the stock market, without trying to outperform the market.
Based on historical performance, PSEi is up more than the times that it is down and the fact that there are more bull than bear markets, this will give you a good idea that you may earn and make money in the stock market passively if you buy the PSEi.
But what if you buy individual stocks inside the PSEI?
For those who are new in investing, the PSEi, is the benchmark of the Philippine market – it is a basket of 30 companies based on a specific set of criteria that the PSE has set, like how active the stock is traded and how big the volume on which it is traded on a yearly basis.
As an investor, you can opt to buy individual companies listed in the PSE based on your own strategy, employing both fundamental and technical analyses.
If you pick well, you get a bigger return as compared to just buying the PSEi.
However, if you pick wrong, you may end up losing more than the returns of the PSEI itself.
There are pros and cons of either buying the PSEi or buying stocks inside the PSEI.
As such, your goal as an investor is to weigh both the risk and the rewards and find out for yourself which fits you better.
The gainers from PSEi
So, here are the top 10 Stocks in the PSEI in terms of how much they have appreciated in price for the duration I have covered – December 27, 2013 to December 12, 2014 – their buying price from last year to latest, and their gain in percentage:
- First Gen Corporation (FGEN) – Buying price from P13.06 to P26.20; 101% gain
- Universal Robina Corporation (URC) – Buying price from P113.1 to P194; 72% gain
- JG Summit Holdings, Inc (JGS) – Buying price from P38.55 to P64.60; 68% gain
- Energy Development Corporation (EDC) – Buying price from P5.33 to P8.47; 59% gain
- Megaworld Corporation (MEG) – Buying price from P3.24 to P5.13; 58% gain
- BDO Unibank, Inc (BDO) – Buying price from P68.6 to P107.30; 56% gain
- GT Capital Holdings, Inc (GTCAP) – Buying price from P772 to P1120; 45% gain
- Semirara Mining and Power Corporation (SCC) – Buying price from P96 to P135.90; 42% gain
- DMCI Holdings, Inc (DMC) – Buying price from P11.20 to P15.64; 40% gain
- Ayala Land, Inc. (ALI) – Buying price from P24.75 to P34.50; 39% gain
I reviewed all 30 companies and ranked them in terms of gain, on the premise that you bought the stocks on December 27, 2013 (the last trading day of 2013), and held them until December 12, 2014.
The stocks covered in the list came from various industries and services.
The gains presented do not include trading in and out of the market which gives you the possibility to earn even bigger – or lose bigger.
As you can see, each of the top 10 stocks in the PSEi beat out the average return given by the index as a whole.
Overall this year, 26 out of the 30 stocks in the index roared and are all up, leaving just 4 stocks in the red.
If you bought any of those stocks individually you would have received a return that is much higher than the gain of the PSEi in general.
Or another way to look at it is, what if you bought all 10 stocks and put equal weight on your allocation of each stock? If you did that, you would still have a gain of 58% – more than double the PSEi in general.
As 2014 comes to a close and a new trading year opens, here are my tips:
- If you are a newbie investor and want the exposure in the stock market, buy the PSEi itself (via index funds or FMETF) or buy individual stocks that are included in the PSEi.
- Avoid speculative stocks that are not part of the PSEi, especially if you are new to investing.
I hope 2014 was a great year of trading and investing for you – and for 2015 to be way better. – Rappler.com
*As of December 12, 2014
Marvin Germo is a registered financial planner, an author, personal finance consultant, and a stock market trader and investor. He has around 7 years of experience in the Philippine financial industry. He specializes in technical analysis and position trading. Read his blog. Follow him on Twitter: @marvingermo