Why buying blue chip stocks at low valuations is good for novice stock investors

Dropping share prices might keep a lot of investors in the sidelines these days, but for stock market beginners, now is actually a good time to seriously consider buying stocks.

From a high of 9,078.37 in January 2018, the 30-stock Philippine Stock Exchange index (PSEi) has since plunged by 32% as of October 2022 market close. The index was not able to get away with the global markets sell-off due to looming concerns of high inflation, the hawkish stance of global central banks, and a strong US Dollar against other major currencies.

While this big index drop could be discouraging to a number of portfolio investors, some market pundits point out that now is actually a good time to start considering stocks to form part of your investment portfolio as shares of blue chip companies are at “bargain prices.”

"If you start accumulating blue chip shares now when its current value is lower than its medium-term historical average, just imagine the potential earnings upside should the index return to the 9,000 level as a result of our country's unique business prospects," said BDO Securities Corporation’s Chief Operating Officer Bernhard Tsai. 

"The PSEi may finally carry out a more significant rally once a successful re-test of the 5,700 support area is done. Once confirmed, take advantage of this unique opportunity to buy good valued stocks at levels lower than its medium-term historical average. Because in the long run, good companies like these blue chip stocks are expected to rise," he added.

BDO Securities is a full-service, multi-product brokerage firm, and a wholly-owned subsidiary of BDO Unibank’s investment banking arm BDO Capital & Investment Corporation. As part of its value proposition of providing easy access to stock trading via online platform (https://www.bdo.com.ph/securities), it also offers valuable market information, insights and analysis through research reports, trading commentaries, educational webinars and market related vlogs. Such analyses are mainly known as either fundamental or technical analyses-based reports/commentaries.

Its fundamental analysis-based report, titled Weekly Wrap, contains the company coverage of BDO Securities Research. In this report, clients can see analysts' rating, target price for each stock, and other fundamental analysis-based data that can aid the investment decision-making of investors.

On the other hand, its technical analysis-based reports, called Technically Speaking, features short-term trade ideas best suited for both technical analysis experts and for those just beginning to learn the technique. 

"Although it takes time for someone to master technical analysis, the Technically Speaking report is formatted in such way that a beginner will be able to follow. Patterns are drawn in the chart while entry and exit prices are clearly indicated," Tsai explained.

As final advice, Tsai said, "You will never learn stock market trading or investing if you don’t try it out yourself. Learning comes with experience. The more trades you execute and learn from the mistakes associated with these trades, the more you will improve in your decision-making. Just know your initial objectives and have realistic expectations," Tsai said.
Zach Golez

A lifestyle blogger based in Iloilo City

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