Why Strategic Averaging Method (SAM) Is So Much Better Than Peso Cost Averaging Method
I need you to read my essay very carefully.
Because you need to understand how terrific your investment strategy is compared to other strategies out there.
In the TrulyRichClub, you use the Strategic Averaging Method (SAM). It's an improved version of the Peso Cost Averaging Method.
Why is SAM better than Peso Cost Averaging?
Answer: Because you'll earn more. How much more? In the long term (20 years or more), you'll earn MANY MILLIONS more.
Let me explain why.
In the Peso Cost Averaging Method, the investor buys stocks of gigantic companies on a regular basis (for example, monthly), always buying, never selling—for decades. He just buys, buys, buys.
In SAM, the investor also buys the stocks of gigantic companies each month for many decades, but we do two things differently:
1. We sell when we believe the share price is very expensive (it hits or goes above our Target Price). This is like a "reset". Because when we sell, we get our cash back and start deploying again to cheaper stocks slowly.
2. We buy only if the price is cheap (we only buy if the price is below our Buy-Below Price).
These two big differences will give you superior returns.
Note: This won't be obvious in the first five years of investing. But it will become very obvious after the fifth or sixth or seventh year... Because at a certain point, Peso Cost Averaging becomes almost a Buy-And-Hold Strategy. (Buy-And-Hold Strategy is another method of investing where you plunk a huge amount and buy a stock—and don't do anything anymore afterwards.)
Why is the Peso Cost Averaging almost like a Buy-And-Hold Strategy? Let's say you invest P5000 a month faithfully. After 20 years of investing, your money would have grown to P5 Million. So your monthly investment
(P5000) is now only 0.1 percent of your total portfolio. It won't make a dent anymore. So it's almost like a Buy-And- Hold Strategy.
But if you follow SAM and—at very strategic times sell portions of your portfolio—you actually multiply your returns because you can buy more stocks at cheaper prices.
I believe that SAM will increase your average growth by a few percentage points. I love giving this example: If a woman at age 25 invests P3000 a month, by the time she retires at 65, she would have P30 million—if her stock market investments grew by an average of 12 percent a year. But if she uses SAM and nudges her average growth upward by just 2 percent, it'll be glorious. At 14 percent growth, she won't have P30 Million, she'll have P55 Million.
NOTE: In the past four years, if TrulyRichClub members simply followed our instructions, our average growth has been 17 percent-plus a year. It's been pretty amazing.
Bottom line, I just want you to appreciate the powerful strategy that you're using here at the TrulyRichClub.
But if you follow SAM and—
at very strategic times sell portions of your portfolio— you actually multiply your returns because you can buy more stocks at cheaper prices.