We all know value investing. Its the main topic of this blog. Its about buying a stock or company in which the stock price is below its intrinsic value. Easy enough to understand but hard to execute. But if you do execute and use value investing in the Philippines, will it work?
While the success of a value investor depends mainly on his skills, I can only speak for myself when it comes to its effectivity. And I would say that, yes, value investing works in the Philippines.
The PSEI year to date performance is -10.75%. My Portfolio on the other hand is 18.56%. Is this a proof that value investing works? It can be. That’s the purpose of this blog. To know if it really works, by tracking performance overtime. Short data of a few years, is not a determining factor to know if something is working. We are here for the long term and we are here to find out. So for now, I’ll say that it works.
But if it works why is everyone not doing it?
It Doesn’t Work All the Time
The reason is that, it doesn’t work all the time. When a strategy works for a couple of years, and then suddenly it stops working, usually the person will try to find a new way of doing things and abandon the old way. But its the nature of the beast. Sometimes you will lag the market and sometimes you will outperform it. But in the long term, you will be better off.
“Value Investing Doesn’t Always Work, Which Is Precisely Why It Works.”
Joel Greenblatt
Getting Rich Quick
Most people can’t stand the idea that his dumb neighbour is getting rich much faster than him. So most people opt for the fastest way they could make money. Value investing is getting rich slowly. And its also why most people don’t want to do it. They want fast money. NOW!
“It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.”
Warren Buffett
It Takes Much More Discipline
“It takes character to sit with all that cash and to do nothing. I didn’t get top where I am by going after mediocre opportunities.”
Charlie Munger
Can you sit for 10 years without buying anything? Just letting that dividends and savings from income pile up on your bank account? Its so hard not to do anything with that cash doesn’t it? Knowing that inflation is eating away at it. And if you’re a person who doesn’t know investing, its also hard not to spend it.
So value investing demands a lot of discipline from its practitioners. That’s why its not popular. Why wait 10 years before you invest, if you can buy now and play and risk the market?
Totally agree with you. As value investors, we should not expect immediate growth in our returns. These things take time and effort in research. If we expect that there exists a holy grail method or formula in investing, there is NONE. If there is one thing that a value investor should do, that is he should have the discipline to never overpay for an investment.
Great blog btw! Keep it up!
Hi Aaron,
Thank you for visiting my blog. You are correct. If there is a formula for investing, mathematicians should be the richest people on earth. But it doesn’t go that way. It involves a lot of factor. Things that can take a lifetime to master. Never overpaying for anything is the main goal.