Mark Twain says “October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
I wonder what he has to say on the dangerous days to speculate in stocks. Or maybe you already know the answer. Speculation is far more risky. Period. Investing in stocks, however, is a lot less dangerous.
Previously I posted a simple analysis and update on my BDO EIP. Since I had two years worth of data, and my action plan was to increase my investment in the EIP, the nerdy part of me decided to analyse the data further, to see, at which day is it best to buy EIP units.
Before I present the results, some caveat first. One, the data I’m using is very limited, just two year’s worth, and these are BDO’s Equity NAVPU, and not the actual PSEi or a particular stock. (But Juan may do a similar exercise for these). With the data I have, I have around 15 observations per date, which is pretty limited. The results are of course affected by the general market trend in the last 2 years, and how well or bad BDO manages its UITF vis-a-vis the market. These can be very crude presentations and indications of the days and months to come. Another thing to consider is cash flow since these dates may be good in terms of UITF price but if Juan’s account is empty on that day, then the chosen date might not be a feasible one in real life.
Finally just wanted to do the exercise to satisfy the feeling-nerd in me and who knows, Juan might be able to do the same approach as I did (or a better one) and get some insights.
Average NAVPU on a Given Day
I averaged the unit prices on the particular closing date, so that’s the average unit price of every 1st, 2nd up to 31st day of the month, from 1st of January 2013 to 14th of November 2014. Objective is to have a crude insight on which days are best to buy into equity units (i.e. lower prices). Benchmark is the market midpoint (just to somehow remove the fluctuations) such that if Juan buys at these lower points, Juan can beat the market on average.
The chart says 2nd, 4th to 6th, 9th to 14th, 16th to 21st and 25th to 28th seem to be good choices in buying UITF. My previous and ongoing investment, which falls on every 15th, is unfortunately one of the peaks of average prices. I chose 15th due to cash flow considerations and I did not think of doing this exercise in Jan2013. Just now. Hindsight.
Grouped NAVPU on the Available Days
But wait, BDO EIP has limited “option days” to set the investment date, namely 5th, 10th, 15th, 20th, 25th and 30th. All the other days are irrelevant, except for two more days from these option days. So I decided to narrow down the analysis to these dates. Some probability theory and assumptions first to support us (I hope I got these correctly).
22 out of 30 days in a month, assumption is 5th, 10th….or 30th will fall on a weekday, hence units will be bought on these days at probability of 22/30. Let’s call the NAVPU “price at option days“.
8 out of 30 times though, these options will be weekends, as such the units will be bought from the previous banking day (e.g. if 15th is a Saturday, unit will be bought on 14th, a Friday), or at most two days banking days (e.g. if 15th is a Sunday, unit will be bought on 13th, a Friday.) Let’s ignore holidays and long weekends for simplicity. I just assumed that the chances of buying at a 14th or at a 13th are the same, 50-50, so I just got their averages then multiplied by the weight of 8/30. Let’s call the NAVPU during these days “price at backup days A & B.”
Same concept applies for 5th, 10th, etc. In short, we have the following pro-rated NAVPU:
= [(Average Price at Options Days) x (22/30)] + [Average Prices at Backup Days A&B x (8/30)]
= Pro-rated Price at Option Days aka Average NAVPU (Grouped)
Came up with the following results.