STOCK INVESTING: STRATEGIC AVERAGING

METHOD (SAM) EXPLAINED AND ILLUSTRATED

As mentioned in my previous post, heres a guide for new and those interested to become Truly Rich
Club (TRC) members on how to invest in the Philippine Stock Market using the Strategic Averaging
Method (SAM).
Before talking about SAM, I might as well give some information about stock market investing.
There are different strategies in investing in the stock market. And it all depends on how
long you intend to achieve your goals.
Short-term investors do day trading which is currently becoming popular because of various
Facebook groups. Short-term may mean daily, within a month or a year.
Day traders jump from one stock to another to where they see it as profitable. The idea is
to have more winning trades and less losing trades.
Theres a potential of quick gains and high returns but it requires significant time to monitor stock
prices and study charts.
Theres also the risk of losing a significant amount of money and it can be stressful if you
dont know what you are doing and you just follow blindly the current hot stock posted
in a Facebook group.
Long-term stock investors have a longer term horizon. It means 5, 10 or 20 years.
It takes less time to monitor the stocks and not as stressful compared to day trading. Some
people refer to it as the boring way investing. Others call it the turtle method.
Long-term investors may use strategies like the buy and hold method or the Peso-cost averaging
method which is applied in the Easy Investment Program (EIP) of COL Financial.
I have written about the long-term stock investing strategies in my older posts here in this blog. You
can make a quick search in the topmost part of this site.
After the not too short introduction, Ill now finally talk about SAM. :P

What is the Strategic Averaging Method (SAM)?

SAM is a long-term stock investing strategy used by Bro. Bo Sanchez Truly Rich Club
members.
A list of recommended stocks to buy are provided to members including alerts on whether to
hold or sell the stocks bought.
I may refer SAM as spoon-feeding stock investing. No need for extensive stock research or
study. A few hours per week or per month is enough to monitor stocks.

SAM House Rules

1. Invest small and slowly.
Invest comfortable amounts. Dont invest big chunks of money all at one go.Invest small
amounts regularly to get good average prices overtime.
If your money is smaller than P300,000, divide your money into six parts, and invest each part for the
next six months.
If your money is more than P300,000, divide it by more than six parts. Perhaps by 12 parts and invest
each part regularly.
2. Buy at Buy Below prices.
For each recommend SAM stock, there is a Buy Below Price. It tells us when to buy that stock.
As long as the price of that stock remains lower than the Buy Below Price, we continue to
buy regularly (every month, every quarter, or every week).
3. Stop buying when prices go beyond the Buy Below price
When the price of a SAM stock goes higher than the Buy Below Price that means we should stop
buying.

If the prices of our SAM stocks go back lower than the Buy Below Price then this gives us a signal
to start buying again.
Buying at Buy Below prices means buying at attractive prices or valuations. Stopping to buy when
prices go above the Buy Below Price means avoiding to buy at high priced valuations.

4. Wait for the Target Price (TP). Sell when the Target Price is hit.
The Target Price is a projected future price of a stock that the stock will go to or go close to given the
performance of the company.
TP is used by brokers to estimate the potential growth of a company considering a 1-year point of
view.
So after buying and accumulating shares at Buy Below prices, all TRC members have to do
now is wait.
As soon as the market price of a SAM stock hits or gets close to our Target Price, we sell.
This means that were selling our shares and were locking in our profit.
5. Reinvest to other SAM stocks.
Use the money you made from selling a SAM stock at the Target Price and reinvest it.
Reinvesting means buying shares of other SAM stocks that are still priced below our Buy
Below Price.
By doing this, were compounding our previous profit with the potential profit well be making with
this new SAM investment.
SAM Illustrated Real Life Scenario
For this illustration Ill use a previous actual SAM stock: D&L Industries (DNL).
DNL is a holding company of the Lao Family, with subsidiaries in the manufacture, development, and
sale of several raw materials and components used by consumer companies in producing their end
products.
1. New Stock Alert: BUY
On 15 February 2013, I received through email a Buy Alert from Bo Sanchez to buy DNL.

2. Buying Shares at the Buy Below Price

Immediately after receiving the Stock Alert, I bought DNL shares at P 6.40 per share which is
still within the Buy Below Price of P 7.80 per share.

For the process on how to buy stocks, you can read it here: COL Financial: How To Buy
Stocks
3. Buying Additional Shares at the updated Buy Below Price
On March 7, 2013 After receiving the March Stocks Update and checking the Buy Below Price, I
bought additional DNL shares at P 6.94 per share.
Below is the monthly Stocks Update showing DNLs Buy Below Price (BBP) of P 8.48 per share.
Take note that theres been an increase in DNLs BBP from P 7.80 per share so you should always
check the stocks update.

Actual additional DNL shares purchased:

Month after month, as long as DNLs price is under its Buy Below Price, Ive bought
additional shares after checking the Monthly Stocks Update.
4. Dividends
Another benefit of long-term stock investing is receiving dividends. Because of the good performance
of DNL, I received cash dividends at P 0.15 per share on August 2013.
Ive reinvested the dividends to buy more SAM stocks that are still the Buy Below Price.

5. Stock Alert: SELL

On May 2014, after waiting and regular monthly buying of DNL stocks below its Buy Below Price for 1
year and 3 months, TRC members received an email for a Stock Alert to Sell DNL.
It was to be sold because the price of DNL is already near its Target Price (TP) of P 10.00.
Take note that same thing with the Buy Below Price, the Target Price can be changed or updated.

6. Stock Alert: Hold Selling

Because DNLs price quickly retreated and went below the Target Price, some TRC members like me
were not able to sell it 0n May 9, 2014.

As a result, Bo Sanchez issued another Stock Alert on for us to Hold and Not To Sell until DNLs price is
close or near its Target Price of P 10.00.

7. Selling DNL
On June 4, 2014, after waiting for DNLs price to go up near its Target Price of P10.00, I was able to
sell DNL at P 9.93 per share.
Thats a good gain of 56.86% from the averaged cost.
Below is the portfolio before selling.

Heres the actual

selling transaction:

8. Checking the SAM Table Online

Besides receiving Stock Updates and Stock Alerts, Truly Rich Club members can access the SAM Table
in the TRC website.
Stock Prices are updated daily for easy monitoring of what stocks to buy, hold or sell.
We can access this by:
1. After log-in, we click the ENTER button on the right side ofTrulyRichClub.com: Gold

2. Click on the SAM TABLE Tab to view the current Recommended Stocks, their BBP, their TP and
what action to take.

The Strategic Averaging Method (SAM) of stock investing is suitable for OFWs and employees who
dont have time to constantly monitor stock prices, to read charts or to extensively study about the
stocks theyre gonna invest in.
Currently, Im trying to do stock trading. I want to experience how it feels like to be a day trader. But
soon Ill go back to SAM because Ill be too busy with my work during the tax season.
SAM is a hassle-free, long-term stock investing strategy. Its entirely different from daily stock
trading. If you cant embrace chaos in the stock market then SAM is definitely worth giving a try.
Ill tell you more about my experience as a newbie and wannabe stock trader in my succeeding posts.
Happy investing and God bless us all! :)
If you have any reactions or questions, feel free to leave a comment or send me a personal message
by clicking this link: http://goo.gl/30vIcU