The best time for buying and selling securities

Over a four-year period starting from the COVID-19 market bottom, a trading strategy on the Philippine Stock Exchange index generated a net annual return of 44.38 percent, while a simple buy-and-hold approach returned 11.27 percent per year. Those numbers, from an analysis published in the Philippine Daily Inquirer, capture the tension at the heart of stock investing: timing can dramatically amplify returns, but the discipline it requires is far from automatic.

The gap between the two strategies is wide, but the analysis came with important caveats: buy/sell periods were chosen with hindsight, no individual stock picking was involved, and the market was on an overall recovery trend. For a Filipino investor deciding when to buy or sell, the real question isn’t which strategy wins in a bull run — it’s which one you can actually stick with through the cycles.

What Moves Prices and Your Timing

Stock prices on the PSE respond to a mix of company-specific events, broad economic forces, and investor sentiment. Earnings reports, interest rate decisions, corporate scandals, and even global shocks like the COVID-19 pandemic can trigger sharp moves. On any given day, the most volatile Philippine stocks — such as Makati Finance Corp. (18.00 percent daily swing) or NiHAO Mineral Resources International, Inc. (16.33 percent) — show just how fast prices can shift.

Understanding these drivers is the first step. But knowing what moves prices doesn’t tell you when to act — that requires a framework for entry and exit that goes beyond gut feeling.

Finding Entry Points That Fit Your Style

There are two main routes to deciding when to buy, and they answer different questions. Fundamental analysis asks: Is this company undervalued relative to its earnings and growth? Technical analysis asks: Is the price pattern signaling a good moment to enter?

For a beginner, the Simple Moving Average (SMA) is a practical starting point. It smooths out price fluctuations over a set period — say, 50 days — and can reveal the underlying trend. When a stock’s price crosses above its SMA, some traders see a buy signal. The Relative Strength Index (RSI) adds another layer: readings above 70 suggest a stock may be overbought and due for a pullback, while readings below 30 can indicate an oversold opportunity.

But no indicator works in isolation. A stock can show an attractive RSI while its industry is in a downturn — the PSE’s Energy Minerals sector, for instance, fell 1.85 percent in a recent month, while Finance rose 6.82 percent. Sector context matters as much as the individual chart.

Exit Strategies: Knowing When to Let Go

Selling is harder than buying. The most common mistake is holding a losing position too long, hoping it will recover, or selling a winner too early out of fear that the gains will vanish. A structured exit plan removes emotion from the equation.

Setting Profit Targets Before You Buy

Decide on a target return — 15 to 20 percent is a common range — and commit to selling when the stock hits it. This forces you to lock in gains rather than chasing an ever-higher peak. If the stock keeps rising after you sell, that’s fine; your strategy worked as designed.

Using Stop-Loss Orders to Cap Losses

A stop-loss order automatically sells a stock if its price drops by a predetermined percentage, typically 5 to 10 percent. It’s a risk-management tool, not a prediction. The goal is to prevent a single bad trade from derailing your portfolio. On platforms like UTrade, these orders can be set directly on the trading interface.

When Fundamentals Change

Even if a stock hasn’t hit your target or stop-loss, a fundamental shift — a missed earnings estimate, a regulatory issue, or a sudden drop in revenue — may warrant an early exit. Reviewing quarterly reports, such as those in the PSE earnings calendar, keeps you informed enough to make that call.

How Market Cycles Change the Answer

The best time to buy and sell depends heavily on where the market is in its cycle. During a bear market, when the PSE index has fallen 20 percent or more from recent highs, buying quality stocks at a discount becomes the priority. Selling during a bear market, unless forced by a stop-loss, often locks in losses that could reverse in the next bull run.

In a bull market, the opposite dynamic applies. Prices are rising, and the temptation is to hold everything indefinitely. But bull markets also produce overvalued stocks — those with an RSI above 70, for instance — where taking profits is the smarter move. The PSE’s historical average annual return of 9.06 percent (1988–2021) suggests that even a modest buy-and-hold approach works over the long term, but only if you resist panic selling during downturns.

The table shows that trading outperformed dramatically in this specific period, but it also required constant attention to Philippine and global markets. Buy-and-hold, while lower-returning, gave investors a higher chance of earning and reinvesting cash dividends — a compounding benefit that trading’s short holding periods often miss.

What to Do With This: Building Your Timing Plan

Rather than searching for a single “best” moment, build a system that works across different market conditions and personal circumstances.

For the Long-Term Investor

If your goal is retirement or long-term wealth, focus on buying during bear markets or broad dips. Use a budget-friendly investing approach like periodic contributions to a PSEi index pooled fund. This automatically buys more shares when prices are low and fewer when they’re high, without requiring you to time the market. Reinvest dividends to compound returns over decades.

For the Active Trader

If you have the time and temperament to monitor markets daily, use technical indicators — SMA for trend direction, RSI for overbought/oversold signals — and always set stop-loss and take-profit orders before entering a trade. The 44.38 percent return example required hindsight, but a disciplined system of entry and exit rules is the closest real-world equivalent.

For the First-Time Buyer

Start with a blue-chip stock from a stable company — one with consistent dividends and a track record of weathering downturns. Open a brokerage account on a platform like UTrade, which offers real-time market access and customizable layouts. Practice with paper trading or bar replay on TradingView before committing real money.

Frequently Asked Questions

Timing Is a Tool, Not a Crystal Ball

The best time to buy or sell securities on the PSE depends more on your personal strategy, risk tolerance, and time horizon than on any calendar date or single indicator. A trading approach can deliver exceptional returns in a rising market, but it demands constant attention and discipline. A buy-and-hold strategy, while less exciting, has historically rewarded patience with an average 9.06 percent annual return and the compounding power of reinvested dividends. Whichever path you choose, the key is to plan your entry and exit before emotions take over.

If this was useful, you might also want to read lessons from the pros on successful stock-picking strategies for the PSE.

Sources

Budget-friendly investing: start small, think big in the Philippines — A practical guide for first-time investors with limited capital.

Common mistakes to avoid when investing in bonds in the Philippines — Covers pitfalls that apply to stock investors too, especially around emotional decision-making.

Philippines Stock Market — TradingView. TradingView, accessed 2025.

When is the right time to buy and sell stocks? A beginner’s guide to smarter investment decisions. Unicapital Inc., 2025.

Three strategies for investing in the stock market. Philippine Daily Inquirer, 2024.