The challenge of covering updates of this Strategy of Stock Accumulation was daunting. But when you stick to the Rules and Conditions it is not that tough.
Stock Accumulation can be done in many ways. Two Practical methods are - Buying a Fixed amount of Shares, OR Investing a Set Rupee Amount at Fixed Intervals.
Today I am sharing the Stock Accumulating Strategy of Investing a Set Rupee Amount at Fixed Intervals. This is a favourite Strategy Mr. Benjamin Graham had followed. This is what Mr. Warren Buffet had been telling Investors to Practice. This is one of the Simplest Ways to build a Decent Portfolio. This is one of the best Strategies that you must get to know to Practice. This is called Dollar Cost Averaging or Constant Cost Averaging, and in the UK this is called Pound Cost Averaging. We in Sri Lanka can call it Rupee Cost Averaging. I call it the RCA STRATEGY.
Are You a Young Executive? Or an aspiring Manager, Perhaps an Entrepreneur who wants to Build Up a Portfolio from a Part of Your Investing funds. You might be a Young Lad who would want to Improve the Habit of Investing and Trading.
We are going through a period that many of us have never encountered. This is the era the world became a NEW NORMAL WORLD. Yes the changes we are doing to us individually and collectively, is shaping the Present and the Future.
Colombo Stock Exchange is the Same. We lagged so many infrastructure developments, thanks to Covid-19 has made the Brains behind the Market to act now. That change is Rapid for sure. Not only that... what about the Listed Companies in the Market? They too have embraced these changes and we will know how they are shaping themselves and their Stakeholders. This is a Global phenomena, as such the magnitude of the change can not be quantified immediately. As such the Price action in the Market will swing rapidly too.
RCA STRATEGY is a fantastic one to follow in this backdrop.
Use it to pick your favourite Companies at your own pace.
The BASIC IDEA of this is to BUY MORE shares WHEN PRICES are LOW and FEWER SHARES when PRICES are HIGH.
You have to decide on a set Rupee Amount, when you invest. To make things simple you can decide on fixed intervals.
What you mean by fixed intervals is that you can decide in investing once a Week, Month or Once a Quarter. You can also invest Set amounts per Stock when you are investing whether or not you have fixed an interval. The idea as mentioned earlier is to Buy more at lower prices and Fewer at higher prices, by allocating a fixed rupees amount each time you invest. Is that difficult to do.
This is ideal for those who would want to follow a system and a set of conditions. IF you do not like to follow a system and procedure to invest or trade this will not help you. But if you are that person who likes to be methodical and analytical this strategy will certainly fit you.
Ask Your IA more about it. If not send me a message or comment below. I will be more than happy to chat about it with you.
Strategy - Stock Accumulation
Counter - COMB
Buying Rule: Buy only if the stock is below 100.00
Buy rule 1st amendment : Buying below 91.80 due to
dividend adjustment
Buy rule 2nd amendment : Will keep accumulating below
the trailing Average Price
Buy Rule 3rd Amendment : Buying below the current Ave.Price.
Buying will Stop when the price is higher than the average.
Intervals of Accumulation: 3 times a week. i.e. Mon,Wed and FRI.
Start Date: 06.12.2019
Sell Rule: only if the P/E ratio is 9.8, OR the ROI is above 50%
Trade is still open as at: 22.05.2020
Cost Per Share based on Fixed Volume - 85.99 (adjusted for dividends)
Cost Per Share based on RCA Strategy = 81.62 (adjusted for Dividends)
Holding Volume - As Per Fixed Volume = 200,000
Holding Volume - As Per RCA STRATEGY = 246,923
Amount Invested - As Per Fixed Volume = 17,197,803.20
Amount Invested - As Per RCA STRATEGY = 20,155,000.00
Dividend income of Rs.345,000/=
Scrip Dividend is pending
Expected Amount of Shares from the Scrip dividend 4678 as per Fixed Volume
Expected Amount of Shares from the Scrip dividend 5776 as per RCA STRATEGY
period since the start: 166 days as at 22.05.2020
Market days : 71 days
Stock Accumulated Days : 40 Days
Present Target Price 1 - Ave Price + 50% - 133.71
Present Target Price 2 - PE of 9.8 - 164.64
(EPS as at 31.12.2019 is 16.80)
2 comments:
When you get the average price, how you calculate it? I mean how many days you are taking for averaging?
Hi Anuruddha,
As long as your average is below the Market Price, you will accumulate. Once the MKT Price Starts moving above your Average you will stop and wait for the target Price to Exit the position.
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