WHAT TO BUY IN

THIS MARKET

Growing your investments in the most

effective way

ISSUE NO. 2 I JULY 31, 2018

After reaching historic highs back in January, our market has been
on a decline and people would ask me just one question: When
should I start buying?

In my experience as a fund manager though, I have come to realize

that the right question is really not so much as WHEN to buy
but more of WHAT to buy.

The truth is, we often forget that when we put money in the
stock market, we are actually buying ownership in businesses,
and not just merely participating in its stock price movement. As
investors, we have to remind ourselves that being part-owners,
we participate in the growth of these companies. As such, our Marvin V. Fausto
primary concern should be determining which companies will
give us good returns over time. Marvin Fausto is COL’s Portfolio Management
Expert and Head of COL Fund Source. He
Of course, knowing what to buy involves reading our stock has over four decades of fund management

recommendations and perhaps doing your own analysis. However, experience, and is the Founding President and
Board Adviser of the Fund Managers Association
I know for a fact that not everyone may have the luxury of time to
of the Philippines.
do that, which is why the most practical and effective approach to
my mind is to own a basket of well-established companies by
investing in funds, more particularly through equity index funds.

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Issue 2: What to buy in this market

By doing so, you are able to diversify your investments right away into the top 30 largest, highly valued, and
most traded companies here in the Philippines – in other words, the components of the Philippine Stock
Exchange Index.

Beauty of Index Funds

The beauty of an equity index fund is that it allows you to manage certain risks that are involved in stock-
picking.

For one, you lessen the risk of putting your money in companies whose product or service may become
obsolete or less competitive, since you are buying different companies operating in different industries.

Secondly, you protect yourself from being hit by specific regulatory or political risks because you are not
concentrated in just one company or sector.

Thirdly, you lessen the possibility of investing in a badly-managed company as you are invested primarily in
good quality companies or what we call the “blue chips,” with a long history of profitability. In fact, what most
people don’t appreciate with an index fund is that it automatically rebalances its components twice a year to
ensure that it captures the current top 30 stocks that best represent the entire market.

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 COL EXPERTS CORNER I JULY 2018
Issue 2: What to buy in this market

Better Historical Returns

As to returns, equity index funds have proven to perform better even compared to funds that aim to actively
select companies, which fund managers believe will provide better returns.

This only tells us that in the long run, it is indeed a difficult task, even for professionals and seasoned experts,
to consistently pick companies that will deliver higher returns than the market.

Note: Figures are as of end-2017, based on the average calendar year returns of mutual funds available through COL Fund Source.

It is precisely for this reason that Warren Buffett claimed that “a low-cost index fund is the most sensible
equity investment for the great majority of investors.”

Yes, investing in an equity index fund may be a simple way to participate in the stock market, but for many, it
definitely provides the most effective approach to grow your money over time.

Disclaimers:
All content provided in COL Reports and COL Articles are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed
outside of the COL Financial website as these may be subject to tampering or unauthorized alterations.

Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested. Although information has
been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may be incomplete or condensed. All opinions and estimates
constitute the judgment of COL’s Equity Research Department as of the date of the report and are subject to change without prior notice. This report is for informational purposes only and
is not intended as an offer or solicitation for the purchase or sale of a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in
securities of derivatives of the companies mentioned in this report and may trade them in ways different from those discussed in this report.

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