What is Peso Cost Averaging and how does it work for investments? I’m sure you always read or hear about peso-cost-averaging (a.k.a. PCA) but you’re wondering how it works, how it makes money, why it’s important, why lots of investors are applying this method for their investments and why you should too.
What is Peso Cost Averaging?
Peso Cost Averaging is a time-tested well-proven method of investing wherein you buy shares of stocks or units of funds regularly over a period of time. It is up to you WHEN, as long as you invest regularly until your target time or until you have reached your investment goal.
How to Invest Money Using Peso Cost Averaging?
You must decide and determine the following:
- How much money you want to invest (P5000, P10,000 etc.) – it is recommended to invest at least 20% of your regular income
- When do you plan to invest it? (1x, 2x, 3x a month, quarterly etc.)
- Your target time – how long do you want to keep your funds invested? The longer the time, the better.
You may apply this strategy if you want to spend a fixed amount of money for a mutual fund or UITF to invest every month. You are going to keep investing this fixed amount of budget every month until your target years.
Another way you can apply this method is by buying worth of P5,000 units or shares of your chosen blue chip stock for example. You are going to invest P5,000 every month no matter what the condition of the market.
How will you make money using PCA?
It is very important to invest with the right companies to receive great returns or profit. If you are investing in Mutual Funds, choose the best mutual fund companies because they have already proven great track records.
If you’re investing in the stock market, choose the giant companies that you are sure would be here for another 50 years or so. These big companies have excellent growth stocks track records.
Because you invest regularly, you are adding and putting up more shares or units of investments in your funds whether the market is up or down. You are also minimizing risks by maximizing your earnings and letting them grow over time.
Peso Cost Averaging Computation Sample:
I’m sharing here how PCA works relating to stock investments. In the sample below, assuming I decided to use around P5000 to buy stocks every 30 days. Notice that whether price of stocks is high or low, I still gain profit in the end.
If you are currently investing in stocks, you can use and download this Excel Format I got from Fitz Villafuerte, so you can easily compute your earnings every month.
Another sample here is taken from my UITF Equity Fund which shows gains every placement of units I bought. Sample below is an investment of 2000 every month. This was a real screenshot from my BDO investment.
PCA Method Conclusion:
Peso Cost Averaging is a very reliable and safer method of investing because you will earn money in the long run. The main strategy is to invest with well-established companies with excellent performance and stable income status. Do it regularly for long term.
Hi Fehl,
I’m a avid reader of your blog. I’ve already started buying stocks last january 2015 and I’m still a newbie in this kind of investment. I just want to ask if I can still earn if I only invest 2.5k per/mo. with some of the giant company like BDO using PCA? is’t ok to invest first on giant companies rather than the smaller one given that smaller companies gives you more share than the other. Thank you!
Yes, BDO is the number one bank in the country so it’s good to invest BDO for long term. To learn more, you can also read my posts at Dailypik
HI Fehl, I love reading your article and I learned a lot from them. Question, using PCA, I am planning to invest approximately 50% of my monthly income (50% goes to family support) in directly stock market . Am I safe to assume not saving some percentage of my income (say 10% for emergency needs) is fine since I can withdraw invested money anytime I can or pull out some of it once I need. As per your article, if I have ever encountered unfortunate time and loss money, it wont be all money I invested, i mean only a portion of it so I can still have money anytime for emergency. As per your advise, better to put money on investment than putting them sleeping in savings account. Thank you and I know I’ll get valuable ideas from you.
Hi Reo. It’s up to you but I still suggest you do that only if you already have stable work income, business income, life insurance.
Thank you Ms. Fehl.. you’re a blessing to new investors like me.. more power!
Hi Fehl, your website was so helpful. anyway, im going on vacation this april in the philippines and i wanted to invest my hard earned money abroad.
could you please tell me which one is better to invest. UITF or this Peso Cost Averaging. or are theyone and the same?
I hope you could give me further explanation because as of now I am thinking if i invest it in Mutual Fund or UITF or PCA.
Hi. It really depends upon the investor. If you’re like me, I like Equity Funds so I have them in UITF and MF. I also prefer monthly placements to be able to build them up better
Hi ms. Fehl, i’ve been reading your posts for two weeks now.. and i can say i’m already addicted to reading atleast two to three post per night because i want to equip myself with knowledge about investing in MF, UITF and stocks before ako sumugod.. although im already in my 30s pero better late than never.. i have some questions though.. pag pasensyahan nyo na po ang mga tanong kasi ngaun lang po tlga ako nag aaral sa pag invest..
1) do you earn dividends sa MF po?
2) my officemate is using Col Financial and she told me she buy stocks from blue chip companies whenever she has extra budget and hndi po nya kinukuha yung money.. she wants to put it in stocks for a long period of time.. for her retirement i think- what are your thoughts on this po.. ok po ba ang gnitong strategy? I want to copy paste her style since im a newbie..
Ms. Fehl thank u for your posts.. hndi nyo po alam kung paano kayo nkakatulong sa mga kagaya namen na gusto rin mag invest pero walang knowledge tungkol dito.. THANK YOU! MORE POWER..
Hi. Thanks for always visiting. You’re always welcome here. 1. When you invest in a Mutual Fund company, you buy shares and that makes you a shareholder of that MF company and you can earn dividends when the company issue them.
2. I recommend buying stocks regularly from blue-chip companies because after 5 years or so, your stocks will definitely grow in value. I personally do that too following Magic 10 strategy which I share on Dailypik.com
Hi ms fehl, is uitf pca uses compounded interest. Thanks
For UITF, everything is computed based on NAVPU. If you invested regularly, cost-average will give you your earnings
Hi Ate Fehl,
I just subscribed to your posts, at lalo lumakas loob ko mag-invest. Thanks to you! I am planning to register sa COL,. Plan ko sana gawin tong PCA na strategy pero medyo magulo pa. May tanong po pala ako, if I would be using PCA, may limit ba on how long should I hold my money?
& may profit ba ko dito every month? Thanks po !
Hi, PCA works best if you invest regularly for long term but it’s always up to you when you stop. Have a plan and stick to it. Your investment would grow every month as you build them but they can also lose because the stock market is not always on the rise. There are ups and down. That is why you must choose the best companies and you must invest for long term.
Hi maam
How do they calculate the result from column 5 to 9. From the cost averaging table above. Can any one explain please.thanks
If you download the excel format now, you’ll be able to see the formula for each column. There is also a shortcut to compute Profit using PCA. It’s: Current Price less Ave. Price x Total number of Shares
Profit= (CP – Ave.P) x Total Shares
hi there.. i got confuse with the figures in pca. ibg sabihin ba ung gain/loss eh yun yung naging output nung hulog mo na 5k a month if so, it means in 60k a year kumita sya ng 75385 ( total sum of gain/loss) tama po ba or mali ako?
Hello Ms. Fehl
Your blogs have been very helpful to me. I decided to give paper assets a try and I been seeing and reading your blogs because they always show up on my searches. My question is what is your opinion about Mark Minervini’s SEPA method? Do you think it’s applicable to the PH stock market?
PS keep posting the informative blogs. You are helping people a lot, you might have even given someone hope of being financially free someday through investing. God Bless! 🙂
Thanks,
Stefan
I’ve answered this question from you on my new post 🙂 Yes, you can also apply SEPA concepts and strategies to PSE stocks but not the tool they use since it’s only for US listed stocks. Cheers! God bless you too!
Hello po
Ms fehl..
Ask ko lng po kng paano mag apply sa mutual fund ..Interested voice ako I’m here OFW po ako..
salmat
elvy
Choose a reputable Mutual Fund company and go there and apply for a mutual fund. You will have to answer questionnaire and have assessment and discuss the funds suitable for you and the risks involved. Then sign your papers, fund your MF and follow your goal.
Hello po.
Ms. fehl
. Thanks s blog n to dami ko natutunan at excited to invest in equity po. Ask ko lng po ms fehl. Gaya ko n ofw if mareach ko n ang 10k they will give cop di po ba. Can i send someone like my relative po para pick up ung COP? Or they will send it by mail? Can i also open two accounts peso balance fund at BDO equity? Thanks more power Godbless us
So excited to invest…..:)
You have the choice how to get your COP – pick up or via mail. You will put the option in the application form. 🙂 If you chose pick up, yes, you can authorize someone and you can put that in the application form. Yes, you can apply for 2 Peso Balanced Funds, it’s your choice. 🙂
Hi Ms. Fehl,
Hmmmm.. it seems that visiting your site has been a regular hobby for me now. 🙂
I have a question with regards to PCA method. Let’s say for example my monthly regular budget for stocks that I can set aside regularly for now is only P5,000.
Then I will choose Company ABC with P30 / share and a board lot of 100, so with the budget that I have, only 3,000 pesos will be deducted from my account giving me 100 shares for Company A. Now, the remaining amount which is 2,000 pesos is the subject of my inquiry 🙂
Given this scenario, what do you think is ideal or would you suggest with the following options below:
a.) Same Company > Increase in buying power > Can buy more Shares? (I want to buy more shares over time)
– I’ll wait for next month and add the remaining 2,000 to 5,000 = 7,000 Php. I can now buy more shares on Company ABC. In this example, I’ll be able to buy 200 shares with an assuming P 32 / share and a board lot of 100.
:: I now have 300 shares after 2 months on Company ABC.
b.) Maximize the budget for investment on the same month? (Since I already set this aside and plan to do it regularly)
– After investing to Company ABC, I still have 2,000 pesos buying power. So instead of waiting for next month, I’ll be looking for another Company and invest the remaining amount. For example, I found company XYZ with a 80 pesos per share and a board lot of 10. This will therefore give me 20 shares for Company XYZ
:: With option B, I was able to buy 100 shares for Company ABC and 20 shares for Company XYZ on the same month.
Looking forward to your response.
Thank you.
Hi Jeff. Thank you for being a regular reader here. 🙂 With questions here, I can suggest have a fix budget and invest slowly and do that faithfully. Since you only have P5000 budget, involved yourself to 3 stocks and buy monthly as much as possible. If 5k is not enough, divide it and buy 2 stocks, then next month, the other stock. Do it alternately as long as you are buying on those 3 periodically. Of course you can make them all sabay in a month if you add more funds to your budget maybe make it 9K so all your 3 picks will be all accounted for 🙂 PCA will be successful only if done long term and periodic investing. Cheers! Happy investing!
Ms. Fhel., good evening.. gsto ko po sana magpaturo how to invest. Im really interested about it. I wanna learn about PCA ms. Fhel.
Hi Abby. Thank you for visiting my post. We posted the guides here by going to the STOCKS tab above. Happy Holidays!
How to do PCA on stock market? Do you invest on the same company multiple times like buying their shares every month?
Yes, PCA is investing periodically to your chosen companies over a long time.
Hi Fehl,
I am really interested on investing using PCA strategy. What bank should I invest my money where I can check online/mobile, BDO or PNB? I only earn 15k/per month salary. I remember to invest only 20% of salary. Please guide where and what type of investment should I take. 5 yrs to 10 yrs. Thank you Ms. Fehl
Hi! I recommend you start either Mutual Funds or UITF. Choose which fund do you wish to open according to your risk appetite since you know your goal already. Majority of banks and MF companies will let you monitor your investments online so no problem.
So it is not recommended to redeem interest earned while continuing PCA?
Hi Ms. Marifel, if you are using peso cost averaging and let’s say the fund is performing well, will partially redeeming the interest earned multiple times affect the remaining balance’s ability to earn in the future?
Thank you.
Yes, it does coz the more fund you have and the longer time you invested determine your profit in the end
Hi Fehl, two questions: Is it a complete choice on your part when to add to your investment on a PCA one without having to incur somewhat a fee for failing to “contribute” for a specific period of time and how much is the minimum most companies require when you decide to buy more? Many thanks 😉
Hi Vance. It depends upon the investment feature. Some companies let manual or automatic scheduling and funding of investments. On banks, they usually require ADA so it’s automatic. All you have to do is make sure you have enough funds available where they will debit you. On stocks, you can either make manual or automatic schedule following your PCA strategy.
can you recommend me an accredited stock broker for me?
COL Fiancial and Philstocks
Good day Ms. Fehl! Is it safe to invest in philequity fund inc? Thank you
Yes. It’s one of the best performing Mutual Funds in the Philippines right now
Hi Fehl,
Do you recommend to start buying jollibee stocks today. I saw it is on hold sa COL… eto rin sana yun long term investment ko.., or should I wait for some time muna?? thanks
Hi Cel. Yes, JFC is on hold. I think MBT and MER are good to buy at this time 🙂