Both Peso Cost Averaging Method VS SAM (Strategic Averaging Method) are great methods/ strategy for stock market investing.
Strategic Averaging Method (SAM) is just an improved version of the Peso Cost Averaging Method.
SAM is better than Peso Cost Averaging in the long-term (20 years or more) because you’ll earn more. How much more, you’ll earn MANY MILLIONS more.
But first, let me explain these two methods so you can have a better understanding what’s the difference between the two.
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Peso cost averaging meaning? (As defined by Think Pesos)
Before we move on, let’s take a look at peso cost averaging method. In a nutshell, peso cost averaging is an investing strategy where you invest the same amount of money in a regular schedule over long period of time.
This means that you’re going to commit and discipline yourself to invest exact amount of money on a regular basis like monthly, quarterly, semi-annual or whatever schedule works for you no matter what.
Here’s a peso cost averaging example; you’re committing yourself to invest P5, 000 in the stock market monthly and purchase Megaworld stock (MEG) for the next 10 years. This means that whatever the market situation is, you’re still buying P5,000 amount of MEG on set schedule. No reasons and no excuses.” – Think Pesos
SAM is better than Peso Cost Averaging in the long-term (20 years or more) because you’ll earn…
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(SAM) Strategic averaging method review
In the Peso Cost Averaging Method, you buy stocks of gigantic companies on a regular basis (for example, monthly), always buying, never selling—for decades.
You just buy, buy, and buy.
In Strategic Averaging Method (SAM), you also buy the stocks of gigantic companies each month for many decades, but there are three things that you will do differently:
1. You buy only if the price is cheap (you only buy if the price is below the Buy-Below Price).
2. You stop buying when prices go beyond the Buy below prices, however, if the prices of the Strategic Averaging Method (SAM) stocks go back lower the Buy below Price this gives you a signal to start buying again.
3. You sell when you believe the share price is very expensive (it hits or goes above the Target Price). This is like a “reset”. Because when you sell, you get your cash back and start deploying again to cheaper stocks slowly or re-invest to other SAM stocks that are still priced below the set Buy below price.
By doing this you’re compounding your previous profit with the potential profit you’ll be making with this new SAM investment. It’s like rolling over a time deposit in the bank.
These three big differences will give you superior returns.
This won’t be obvious in your 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 afterward.)
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.
Let say at age 25 you invests P3000 a month, by the time you retire at 65, you would have P30 million – if your stock market investments grew by an average of 12 percent a year.
But if you uses SAM and nudges your average growth upward by just 2 percent, it’ll be glorious. At 14 percent growth, you won’t have P30 Million, you’ll have P55 Million.
NOTE: In the past four years, if TrulyRichClub members simply followed their instructions, their average growth has been 17 percent-plus a year. It’s been pretty amazing.
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