August a.k.a "Ghost Month" is coming [What to expect]

We've all heard of it at least one point in our life, but what is Ghost Month really and what does it entail?

I've heard about it since I was a child; my mother owned a business and she always associated August as "Patay na Buwan" (Dead Month), or I guess it's the same thing as "Ghost Month". It is when business growth (not just profits) usually slows down. It is only recently that I knew it originated from a Chinese belief about spirits roaming the earth at this period.

The 7th month in the Lunar calendar (not Gregorian) is generally referred to as the Ghost month. If we were to base it in lunar calendar, it means it doesn't always start in the month of August. It's probably for simplicity that August became the Ghost month and for that reason, this articles assumes the same thing.

The 15th day of the 7th month in the Lunar calendar is the Chinese Ghost Festival. This year, 2013, it's on the 20th of August. This is the time when it's believed that our realm + heaven and hell open, and spirits wander the earth.

During this month, it's most likely that many businesses, including non-Chinese ones, who believe in this do not sign new contracts or conduct any major decisions because it may be considered bad luck. In a business culture highly influenced by the Chinese, this is something to be considered because it will most likely affect your business whether you like it or not.

But not only does August fall on the Chinese Ghost Month belief, there are other seasonal events that happen to fall in the same period: Frequent rains / storms, parents just finished paying the tuition fees of their children, and preparation for Christmas season when people really spend money. All of these combined affect consumer spending and businesses.

So what happens to investments during August a.k.a. the ghost month? Bond market is not that much affected since debts are paid continuously. The only thing I can think of right now that may affect the bond market is that there may be less businesses who will offer new bonds during this period.

For the stock market, expect a temporary downward trend during this month. People who believe in this may stop buying or selling stocks. Combined with other people who are fearful during this month, we may see lower volume of trades during this period.

For those invested in Mutual Funds or UITF's, it's the same thing, since your fund is invested in the same Bond or Stock market.

If you want to know if you should take your profits and sell your stocks prior to this period, then I believe the answer is No. It's tricky to time the market, and Ghost month is not a crisis. In fact, this month may be an opportunity to buy more shares in the company you believe in when the share price goes down. Just like the saying goes, "Buy when people are fearful".

I asked my Chinese friend if he stops buying and selling shares during the Ghost month period and he said "No, in fact, my first big gain, I bought them during the ghost month."

Getting started with Stocks Trading (Philippine Market)

My trading account in First Metro has been approved! I can start trading as soon as I fund my account. It requires a minimum of P25,000 to start a First Metro account. If you want to know if investing in stocks is for you, then read on. But before anything else, be sure you're ready to start investing in any kind; you may want to read the "before getting started" entry if you haven't done so.

In my previous post, I talked about Mutual Funds where your money belongs to a bigger collection of fund managed by an expert. Now, if for some reason you feel like you can beat the best fund manager out there, AND you have the TIME to do it then this is for you. You really need to have time to do this, and preferably a reliable internet connection during trading hours (more on this later). It is strongly suggested that you attend seminars before you jump into trading stocks. As for me, I'll take my chances and jump into it right away. Experience is the best teacher anyway; I want to experience it first-hand. I'll also seek guidance from my finance mentor.

Only put money that you are willing to lose, especially when you're just starting (like me).  You need to be financially and emotionally prepared to lose big or in worst case lose it all, and I mean from P25,000 to P0. It is said that trading stocks is like gambling, but it is only gambling to people who don't do research or consume knowledge. As always, you can mitigate risks when you equip yourself with knowledge. On the bright side, the risk is high because the potential to gain is also high.

Let's first define what is a stock. From Investopedia, a stock is a type of security that signifies ownership in a corporation and represents a claim on part of  the corporation's assets and earnings. So in a basic sense, you're buying a part of the company and you become "part owner" of that company. "Part owner" is in quotes because it takes a lot of money to have a major role in a company that you bought stocks from.

Getting started with Mutual Funds in the Philippines

This October, I started investing in First Metro Assets Management Inc. I chose Save and Learn Equity Fund (SALEF); the minimum amount to invest is P5,000.

From the word itself "mutual", meaning it's shared. Mutual Fund is a collection of funds gathered from investors which is then handled by a manager. The manager is called "fund manager". The idea is that you are entrusting your money to a person who is, in most cases, more knowledgeable than you are in investing it to different security options like stocks, bonds, etc.

The advantage of this is that your money belongs to a pool which is big and has a buying power far greater than yours. This means that the investment is diversified and has greater potential to earn more. This is realized more if you don't have a huge amount of money to invest (e.g. you're starting with 5,000 Pesos). Your money is basically riding on the collected funds. Another advantage is you don't have to worry about it minute by minute or even day by day since you're not the one managing the fund.

Possible major market rally ahead as of Oct 2012

I'm not 100% sure what it means, but market rally is basically a good thing for investors because prices go up.

By Wikipedia definition of a "rally" in terms of Stock Market:
A rally is a period of sustained increases in the prices of stocks, bonds or indexes. This type of price movement can happen during either a bull or a bear market, when it is known as either a bull market rally or a bear market rally, respectively. However, a rally will generally follow a period of flat or declining prices.