Strategic Peso Averaging Method

In my last post I shared the story of Hal, a strict practitioner of the peso cost averaging method (PCA). He has a UITF account, specifically the BPI Philippine Equity Index Fund (BPI PEIF).

Every 15th day of each month, when his salary arrives in his bank account, he transfers 1,000 pesos to his UITF account. If the 15th day happens to be on a weekend or a holiday, it will be credited to his UITF account on the next banking day.

He started on the 15th of January 2014 and redeemed only on January 30, 2018. For his efforts he made a profit equivalent to 5.82% per year. The average inflation in those four years was 2.12% (see here). Hal was ahead  of the inflation.

But is there a way that he could have earned more?

Let's hear the story of Honi. She is  a liberal practitioner of PCA. I call her method SPAM, short for strategic peso averaging method. Instead of adding every month to her UITF account, she only does so when the PSEI is on the uptrend. Her chosen fund is, ta-da, also the BPI PEIF.

When the index is on a downtrend she saves the monthly amount and invests the accumulated savings in the month around the bottom of the index. Then she does another round of monthly topups when the PSEI is on the way up. Wash, rinse, repeat until January 2018!!

Obviously, she has learned some rudimentary knowledge of the PSEI chart. This is what her line chart says:

No fancy moving averages there, nor candlestick patterns. But it served her well enough.

And this is the result of her investments:




Assumptions: Hal and Honi put in the initial required amount of 10,000 pesos to open their account.

Scoreboard, so far:

PCA =  5.82%
SPAM = 6.38%  6.65% (updated Nov. 18, 2018)

Next week we will look into the investment journey of  Hara where she nets 10%+ during the same time frame.

She is using SPAM v2.