As the Stock Exchange of Thailand (SET) index has breached 1,700 points, it has become more difficult for long-term investors to decide whether to accumulate more stocks or take profits.
Bannarong: Help with investment goal
Bualuang Securities (BLS) has introduced an investment strategy called value accumulation (VA) -- which is similar to dollar-cost averaging (DCA) -- as a buying option for program-trading customers who want to accumulate stocks at a low price when there is high fluctuation in the market.
"No matter which direction the market moves, investors who set a mission to accumulate stocks for their long-term financial plan might miss their goal," said BLS managing director Bannarong Pichyakorn.
Mr Bannarong said stock accumulation on a daily or monthly basis will help investors maintain their long-term financial goal.
Investors who gravitate towards the DCA strategy will buy selected stocks with the same amount of money on a regular daily, weekly or monthly basis.
VA adopts a similar concept; the main difference from DCA is the purchase approach.
Money injected to the investment portfolio may be a fixed amount, but equity purchases are varied depending on their objectives of the investment portfolio value.
For example, if an individual plans to put 5,000 baht every month into an equity portfolio, the target investment amount in the 10th month should be 50,000 baht.
Investors using the DCA strategy will buy selected stocks at the total of 5,000 baht each month up until the 10th month.
Those using VA will do the same monthly, but will be able to stop buying stocks if share prices are higher than the projected price target, resuming the purchase when share prices fall.
"VA strategy helps investment portfolios grow faster and the average return would be better if we are able to adopt DCA or VA strategies on a daily basis with computer program trading," said Mr Bannarong.
According to BLS historical data, dates of stock purchase affect the return on investment.
Mr Bannarong cited the Airports of Thailand case study from 2014-16 based on share purchases of 10,000 baht a month and 0.03% commission fee. It was found that AoT shares purchased on every third, 11th, 12th, 13th days provided the highest return at 41.1% per year.
If the shares were bought on the 25th, 26th, 27th and 30th, the return was 32.5%. Buying on the 28th of every month gave the lowest return at 31.3%.
