Ghost Month: To Invest or Not?

INVESTMENT INSIGHTS


Ghost Month: To Invest or Not?


The ancient Greeks threw coins into wells to keep them from going dry. Today, we continue to toss coins for good fortune. Throughout history, people have believed that certain rituals and objects can influence their luck.  Studies show that psychological biases greatly affect financial
decision-making. Although superstition may be a significant part of how people make sense of uncertainty, will it be the right foundation for making sound investment decisions?
 
Fearing the Ghost Month
One common phenomenon in which superstition affects business judgments would be during the "Ghost Month." It stems from a popular Chinese belief that during the month of August (7th month of the Lunar Calendar), the Gates of Hell open allowing spirits to roam the earth. People avoid making major decisions during this month for fear of inciting bad luck. Regional stock markets, especially those with predominantly Chinese investors, usually weaken and experience relatively lower volume.  Moreover these are the Dog days of summer for the western markets as it is the hottest part of the year. Consequently, it is when most European and American fund managers go on vacation.
 
It is the fear of the unknown which drives people to act based on superstitious beliefs.  Fear fuels investors to stay on the sidelines until the ghost month ends.  It is the same fear that keeps them from investing in the market when it is barely showing signs of recovery. This often leads
to lost opportunities. Financial markets are cyclical in nature and have, historically, bounced back from economic downturns.
 
Bottomline
A change in perspective can be a key to securing your financial well-being. Warren Buffet advises that one should “be fearful when others are greedy and greedy when others are fearful”. Since prices of both the bond & stock markets tend to go down this time of the year, it should be a good opportunity to enter the market at a lower cost.  You can take advantage of this opportunity that others don’t recognize because of irrational fear and go where markets are recovering – like the US Bond Market. Some investors may be holding back since it is “The Ghost Month," made riskier by the rising interest rate environment. However, you might want to look at it from with a different view, a more opportunistic rather than a fearful perspective of the market.
 
FEATURED FUND: BPI Global Bond Fund-of-Funds
Formerly known as the BPI International Fund Plus, it is the first Fund-of-Funds in the Philippines. Simply put, it is a pooled fund that invests in professionally managed bond funds outside the country consistent with the Fund’s objective of providing capital appreciation and income to investors.  Recommended for investors with a moderately aggressive profile, BPI Global Bond Fund-of-Funds serves as an ideal option for investors looking to take advantage of opportunities in the global markets. For a minimum of USD500, investors can already access offshore funds managed by reputable global fund managers.
 
As a fund-of-funds, it is allowed to invest at least 90% of its assets in foreign-currency denominated fixed income collective investment schemes. The Fund may be invested up to 100% in global bond funds, and at most 40% in global money market funds, where such allocation shall depend on the prevailing market conditions.
 
As with anything in life, the road towards securing your financial well-being may not always be smooth, but keep in mind that anything worth having never comes easy. As Mario Andretti once said, "Desire is the key to motivation, but it's determination and commitment to an unrelenting pursuit of your goal - a commitment to excellence - that will enable you to attain the success you seek." Ghost month or not, financial decisions should be founded based on your investment objective, risk profile, and investment horizon. As long as you don’t lose sight of these, your goals will be within reach.
 
By: Hanssen A. Salinas
Published on August 10, 2014

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