One of the easiest and most convenient way to invest in the stock market is through the Easy Investment Program (EIP).
What is EIP?
The easy investment program or EIP is a feature from COL wherein you can set a fixed amount of money to be invested regularly on a particular stock.
Think of it like a set and forget strategy – a safe and passive way of investing that eliminates the idea of having to actively time the market, potentially reducing risks in the short term and maximizing returns over the long term through the time-tested strategy of cost averaging.
Cost averaging is an investment strategy of buying a fixed amount of a particular investment on a regular interval regardless of the share price. Meaning, when prices are low, you buy more shares. And when prices are high, you buy less shares.
Applying this technique does not guarantee that you won’t lose money on your investments. It simply allows you to invest over time rather than investing in lump sum in exchange for a favorable average price in return.
To illustrate, let’s say we had setup an EIP for Megaworld Corp. (MEG) every 7th of the month last year, from January to December 2017, with a fixed amount of P10,000.
If you look at the table above, you’ll notice that the number of shares purchased varied due to changes in price per share each month. When prices were low, more shares were bought. And when prices were high, there were fewer shares.
To compute for the number of shares, simply divide the fixed amount by price per share. But since the minimum number of shares we can buy is dictated by the board lot, we had to adjust the share numbers accordingly to keep the cost under P10,000.
In earlier months, when prices were below P5 a share, we could only buy a minimum of 1000 shares. And when prices went above that mark, the minimum came down to 100 which gave us much more flexibility in buying enough shares to maximize the P10,000 limit.
To calculate for the weighted average price, you multiply each price for the number of shares bought at that price and sum it up. Then divide the result with the total number of shares purchased.
Take note, I’ve excluded trading and handling fees to simplify the calculation.
Dividing P106,062 (total cost) by 23,200 (total number of shares purchased) gives us P4.57 a share (weighted average price) which came out to be lower than P5.15 (December’s price per share). Thus, providing a good amount of return of 12.65% in a twelve-month investment period.
Key things to consider
- Money – How much money can you invest? Can you set aside P1,000 or P10,000 to invest regularly? It’s up to you to decide the fixed amount. But to maximize trading fees, make sure to purchase not less than P8,000. Whatever amount you decide, just make sure you’ll be investing money you won’t be needing in the short term or in case of emergencies.
- Frequency – How often can you invest? Can you afford to invest on a weekly or monthly basis? If you’re paid monthly salary, then consider investing in monthly intervals so you can set aside money every time you get your pay check.
- Time – How long would you stay invested? Check your investment goal. Is it for a year or two? Remember, stocks tend to perform better in the long term. So, the longer you invest, the greater potential returns you can achieve.
- Stock – Choose a company to invest in. Look for companies with good fundamentals and track record. Consider big companies that are included in the PSE Index.
Creating an EIP schedule
You can start creating an EIP schedule under Trade > EIP Scheduler > Schedule EIP.
Make sure to set the following correctly:
- Stock Code – Choose a company you’d like to invest in.
- Cash Value – Set a fixed amount to be invested regularly.
- Period – Can be set to regular intervals of weekly, monthly, quarterly, or semi-annually.
- Start Date – This serves as your regular buy date. If it falls on a weekend or holiday, the buy order will be sent on the next trading day.
- Duration – Can be set from 6 months to 3 years. If you need to invest longer than 3 years, simply create another EIP schedule.
- Order Mode – Can be set to manual or automatic. If set to automatic mode, your buy orders will be sent automatically and executed every period. In manual mode, you’ll be alerted as it will be set as a reminder that requires your input to confirm and execute the trade.
Let me show you how to do it. Let’s create an EIP schedule for Semirara Mining and Power Corp. (SCC) starting on 7th May 2018 with P10,000 monthly intervals for a year.
- Fill out the stock code and cash value you wish to buy over time.
- Then choose the period, start date, and duration.
- Finally, choose an order mode – either to be prompted manually or sent automatically every period
When you’re done, click submit. On the next page, review and confirm your EIP calendar details carefully.
Enter your password and click ok to submit your order. Then, a confirmation page about your newly created EIP calendar will show up.
Click ok to continue. If you need to make some changes, you can cancel or modify it under Trade > EIP Scheduler > View EIP Schedules.
And there you go. That’s how you create an EIP schedule.
If you’re looking for an easy and convenient way to invest in the stock market, then creating an EIP schedule is for you. It’s a simple yet effective technique of owning stocks over time through cost averaging.
It’s a passive way of investing and considered to be a safe alternative rather than actively timing the market, potentially reducing your risks in the short term and maximizing your returns over the long term.
In this article, you’ve learned how to create an EIP schedule. If you have some questions, feel free to drop me a comment below.
Thanks for reading!