The sunk cost fallacy is a cognitive bias that makes you stick to a losing investment or project. This is even when it would be better to cut your losses and move on. The sunk cost fallacy occurs when you consider the money, time, or effort that you have already invested in something as a reason to continue investing, regardless of the future prospects or outcomes.
The sunk cost fallacy can lead to irrational and suboptimal decisions, as it prevents you from evaluating the current situation objectively and rationally. Instead of focusing on the potential costs and benefits of your future actions, you are influenced by the past costs that you cannot recover.
Examples of the Sunk Cost Fallacy
The sunk cost fallacy can affect your investment decisions in various ways. Keeping a stock that is declining in value is a common scenario. Hoping that it will rebound instead of selling does little to help investors. Sometimes, people even tend to double down on that investment for no good reason.
In general life, it can also be referred to as the “economics of spilled milk.” We tend to worry too much about wasting things we’ve spent resources on. Often, this comes to the point of making suboptimal decisions.
Why Does the Sunk Cost Fallacy Happen?
The sunk cost fallacy happens because of several psychological factors, such as:
– Loss aversion: Loss aversion is the tendency to prefer avoiding losses over acquiring gains. People feel more pain from losing something than pleasure from gaining something of equal value. Therefore, they are reluctant to accept losses and try to avoid them at all costs.
– Commitment bias: Commitment bias is the tendency to remain consistent with one’s previous actions or beliefs, even when they are contradicted by new evidence or information. People feel the need to justify their past choices and actions, and to maintain a positive self-image and reputation.
– Escalation of commitment: Escalation of commitment is the tendency to increase one’s investment or involvement in a situation, despite negative feedback or outcomes. People feel the pressure to prove themselves right, to avoid wasting their previous investments, or to avoid admitting failure.
How to Overcome the Sunk Cost Fallacy in Investing
Overcoming the sunk cost fallacy in investing can be challenging, but the following strategies can help you:
– Ignore the past costs: The past costs that you have already incurred are irrelevant to your future decisions. They are sunk costs that you cannot recover, no matter what you do. Therefore, you should ignore them and focus on the future costs and benefits of your actions.
– Evaluate the opportunity cost: The opportunity cost is the value of the next best alternative that you give up as a result of your decision. By continuing to invest in a losing situation, you are missing out on other opportunities that could be more profitable or beneficial. Therefore, you should evaluate the opportunity cost of your decision and compare it with the expected value of your current investment.
– Learn from your mistakes: The sunk cost fallacy can also be a learning opportunity, if you are willing to admit your mistakes and learn from them. Instead of being defensive or stubborn, you should be open-minded and flexible. You should analyze your decision-making process, identify the sources of error or bias, and correct them for the future.
In Life and in Trading
Always make sure to have an objective view of the situation. Try to assess the costs and benefits of each decision. Just because you’ve already invested time or money in something, doesn’t mean you need to continue to do so.
Altcoins (alternative coins) are cryptocurrencies that are not Bitcoin (BTC). They are called altcoins because they offer alternatives to Bitcoin and traditional fiat money. They were created to improve upon the perceived limitations of Bitcoin or to provide new or additional capabilities or purposes. There are thousands of altcoins on the market, each with its own features, advantages, and challenges.
Types of Altcoins
Altcoins can be classified into several types based on their design, function, or origin. Some of the common types are:
Forks
Forks happen when altcoins are derived from the codebase of another cryptocurrency, usually Bitcoin or Ethereum. These can occur when a group of developers disagree with the original project and decide to create a new version with different rules or features. For example, Bitcoin Cash (BCH) and Bitcoin SV (BSV) are forks of Bitcoin. They aim to increase the block size and transaction capacity of the network. Ethereum Classic (ETC) is a fork of Ethereum that preserves the original blockchain after a controversial hard fork in 2016.
Tokens
Tokens are altcoins that are built on top of another blockchain platform, such as Ethereum, Binance Smart Chain, or Solana. They use the existing infrastructure and security of the underlying platform and do not have their own independent blockchain. They can also represent various assets, such as utility tokens, security tokens, non-fungible tokens (NFTs), or stablecoins. For example, Tether (USDT) and USD Coin (USDC) are tokens that are pegged to the US dollar. The goal of these are to provide stability and liquidity in the crypto market. CryptoKitties and Axie Infinity are tokens that are used in popular blockchain games.
Native coins
Native coins are altcoins that have their own original blockchain and do not rely on any other platform. They usually have their own unique features, consensus mechanisms, or use cases that distinguish them from other cryptocurrencies. For example, Monero (XMR) and Zcash (ZEC) are native coins that focus on privacy and anonymity, while Cardano (ADA) and Polkadot (DOT) are native coins that aim to create interoperable and scalable blockchain ecosystems.
Pros and Cons of Altcoins
Altcoins offer various benefits and drawbacks compared to Bitcoin and fiat money. Some of the pros and cons are:
Pros
– Innovation: Altcoins enable innovation and experimentation in the crypto space, as they introduce new technologies, solutions, or applications that can enhance the functionality, efficiency, or security of the blockchain. They can also cater to specific needs or preferences of different users, communities, or industries, such as gaming, DeFi, or social media.
– Diversity: Altcoins provide diversity and choice in the crypto market, as they offer different features, risks, and rewards for investors and traders. They can also diversify the portfolio and hedge against the volatility or dominance of Bitcoin or fiat money.
– Accessibility: Altcoins are generally more accessible and affordable than Bitcoin or fiat money, as they have lower entry barriers, fees, or regulations. They can also reach more people and regions that are underserved or excluded by the traditional financial system, such as the unbanked, the underbanked, or the developing countries.
Cons
– Volatility: Altcoins are more volatile and risky than Bitcoin or fiat money, as they are subject to high price fluctuations, market manipulation, or speculation. They can also lose value or become obsolete due to competition, regulation, or innovation.
– Security: Altcoins are less secure and reliable than Bitcoin or fiat money, as they are more vulnerable to hacking, fraud, or theft. They can also suffer from technical issues, bugs, or errors that can compromise the functionality or integrity of the blockchain or the tokens.
– Complexity: Altcoins are more complex and confusing than Bitcoin or fiat money, as they require more knowledge, research, or understanding to use, store, or trade. Altcoins can also have different standards, protocols, or interfaces that can create compatibility or interoperability challenges.
Future of Altcoins
The future of altcoins is uncertain and unpredictable, as it depends on various factors, such as technology, regulation, adoption, or innovation. However, what we are sure of is that they will continue to coexist with Bitcoin and fiat money. This is because they complement/supplement each other for different use cases. Given that they offer superior features compared to Bitcoin, it’s also possible for them to eventually surpass it.
In a groundbreaking move to revolutionize the financial landscape, Singlife Philippines and Investa are thrilled to announce their strategic partnership, combining Singlife’s cutting-edge insurance solutions with Investa’s leading social-financial platform. This collaboration is poised to redefine how Filipinos manage their financial needs, providing a seamless and holistic experience.
Complementary Partnership: Ensuring Protection for Investors
Investa’s commitment to empowering individuals to grow their wealth aligns seamlessly with Singlife’s mission of providing financial protection and peace of mind. Investa makes investing a viable option for all, emphasizing accessibility and affordability by offering investment opportunities for as low as PHP 50.
Meanwhile, Singlife’s suite of products perfectly complements Investa’s stock fund offerings. The partnership aims to provide Investa customers with diverse life insurance products for emergencies, income loss, medical needs, and life goals, all of which will be made available on Investa’s website and other platforms.
Major Benefits of the Partnership:
Convenience & Accessibility: Users can effortlessly explore Singlife’s insurance products alongside their investment portfolios, streamlining their financial journey in one integrated space.
Affordable Solutions: Aligned with Investa’s goal of making investing accessible, Singlife Philippines offers insurance packages at competitive rates, ensuring financial security is within reach for all.
Educational Resources: Both brands share a commitment to building financial literacy. Investa will integrate educational content on Singlife’s products, promoting informed and responsible decision-making among its user base.
Empowering Filipinos Toward a Secure Financial Future
Starting December 15, 2023, Investagrams users can seamlessly access Singlife’s suite of insurance products directly on the platform’s website and mobile application. This transformative integration aims to empower Filipinos towards a secure, reliable, and accessible financial future.
Sherie Ng, Singlife Philippines’ Co-Founder and Executive Director, shares her excitement: “This partnership marks a significant milestone in providing Filipinos with a comprehensive financial ecosystem. By combining Singlife’s insurance solutions with Investa’s robust financial tools, we collectively offer users a one-stop-shop for their financial needs, from investment to financial protection.”
For more information about the Singlife and Investa partnership, please visit Investagrams’ website or explore Singlife offers here.
About Singlife Philippines Inc.: Singlife Philippines is the first and only purely digital life insurer in the country, offering innovative and accessible financial solutions.
About Investa Inc.: Investa is a leading social-financial platform in the Philippines, dedicated to enabling individuals to start their investing journey with the right tools, education, and technology.
Volatility is a term that describes how much the prices of financial assets fluctuate over time. It is an important concept for investors and traders. This is because it reflects the level of risk and uncertainty in the markets. High volatility means that the prices can change significantly and unpredictably in a short period of time. Low volatility means that the prices are more stable and consistent. One of the most widely used indicators of volatility is the CBOE Volatility Index, or VIX.
Also known as the “fear index”. The VIX measures the market’s expectation of volatility over the next 30 days, based on the prices of options on the S&P 500 index, which is the benchmark for the US stock market. It is calculated and updated in real time by the CBOE and is expressed as an annualized percentage.
The Makings of the VIX
The VIX is derived from the prices of both call and put options on the S&P 500. A call option gives the buyer the right, but not the obligation, to buy the underlying asset at a specified price (the strike price) before a certain date (the expiration date). A put option gives the buyer the right, but not the obligation, to sell the underlying asset at the strike price before the expiration date. The prices of these options reflect the market’s perception of the probability and magnitude of the future price movements of the S&P 500.
The VIX is calculated using a complex formula. It takes into account the prices of various options with different strike prices and expiration dates. The formula essentially aggregates the implied volatilities of these options, which are the volatilities that are implied by the option prices, rather than the historical volatilities that are based on the past price movements. The implied volatilities are weighted and averaged to produce a single number that represents the market’s expected volatility.
The VIX as a Measure of Fear
Generally, a high VIX indicates a high level of fear or pessimism among investors. It means they expect large price swings and are willing to pay more for options to hedge or speculate on the market movements. Conversely, a low mar indicates a low level of fear or optimism among investors. It signifies that they expect small price changes and are less interested in options. The VIX is inversely correlated with the S&P 500. Usually, when the VIX goes up, the S&P 500 goes down, and vice versa.
The VIX is not only a measure of volatility, but also a tradable instrument. Investors and traders can use various products, such as futures and exchange-traded funds (ETFs). These let you gain exposure to the VIX or to hedge against volatility risk. For example, one can buy VIX futures or options to profit from an increase in volatility. Alternatively, one can buy or sell ETFs that track the performance of the VIX or its inverse, such as the iPath S&P 500 VIX Short-Term Futures ETN (VXX) or the ProShares Short VIX Short-Term Futures ETF (SVXY).
To Sum it Up
The VIX is a useful tool for investors and traders who want to measure and trade volatility in the market. However, it is not a perfect indicator, as it is based on market expectations and not on actual outcomes. Therefore, it is important to use the VIX in conjunction with other tools and indicators, such as technical analysis, fundamental analysis, and economic data, to get a more comprehensive and accurate picture of the market conditions and trends.
You can treat it as another lens to use while looking at the markets.
December is often a good month for stock investors, as many markets tend to rally during this period. According to historical data, the S&P 500 has gained an average of 1.3% during December, the highest average of any month and more than double the 0.7% gain of all months. Even in the Philippines, stocks in December tend to do better vs. previous months.
But what are the reasons behind this seasonal phenomenon?
Why Does This Happen?
There could be many reasons why stocks in December typically do better.
Window dressing: This is a practice where fund managers buy stocks that have performed well during the year to improve the appearance of their portfolios before the year-end. This creates a positive feedback loop, as more buying pushes the prices of these stocks higher, attracting more buyers.
Tax-loss harvesting: A strategy where investors sell stocks that have declined in value during the year to offset their capital gains and reduce their tax liability. This creates a negative feedback loop, as more selling pushes the prices of these stocks lower, attracting more sellers. However, some of these investors may buy back the same stocks in December, after the 30-day wash-sale rule expires, to restore their positions. This creates a rebound effect, as more buying pushes the prices of these stocks higher, attracting more buyers.
Holiday spending: This is a factor that affects consumer discretionary stocks, such as retailers, restaurants, and entertainment companies, that benefit from the increased spending during the holiday season. Some believe that retailers tend to invest more during the holiday season.
Santa Claus rally: The term refers to the tendency of stocks to rise during the last five trading days of December and the first two trading days of January. This phenomenon is attributed to various factors, such as the optimism and cheerfulness of investors during the holiday season, the anticipation of the January effect, and the low trading volume that makes the market more susceptible to price movements. In effect, stocks in December could be benefitting from the positive feedback loop created.
Should You Buy Stocks in December?
Of course, these factors are not guaranteed to work every year. Factors like the economic outlook, the monetary policy, and geopolitical events can all affect stocks in December. Therefore, investors should not rely solely on seasonality. Treat it as a tailwind, and use other tools and indicators to better time your investments.
In summary, stocks in December tend to perform well, as there are several seasonal factors that create a positive momentum for the market. However, investors should also be aware of the risks and uncertainties that affect the markets.
The Intercontinental Exchange (ICE) is a leading global operator of financial and commodity markets and exchanges. It offers a range of products and services that enable customers to trade, hedge, invest, and manage risk across various asset classes, such as equities, derivatives, fixed income, commodities, and currencies. It also provides data, technology, and analytics solutions that support market participants and regulators in making informed decisions and enhancing efficiency.
History and Background
ICE was founded in 2000 by a group of energy traders and brokers who wanted to create a more transparent and efficient marketplace for trading over-the-counter (OTC) energy contracts. ICE initially focused on the electronic trading of natural gas and power contracts, and later expanded into other energy and environmental products, such as oil, coal, emissions, and renewable energy.
In 2001, ICE acquired the International Petroleum Exchange (IPE), a London-based futures exchange that offered contracts on crude oil, natural gas, and refined products. ICE transformed the IPE into an electronic platform and renamed it ICE Futures Europe. In 2005, ICE became a publicly traded company on the New York Stock Exchange (NYSE).
Since then, the Intercontinental Exchange has grown through a series of strategic acquisitions and organic growth, diversifying its product offerings and geographic reach.
Products and Services
The intercontinental exchange operates several business segments, each offering a variety of products and services to meet the diverse needs of its customers. These segments include:
Exchanges
ICE operates 12 regulated exchanges around the world, where customers can trade futures and options contracts on various asset classes, such as energy, agriculture, metals, interest rates, equities, indices, and currencies. ICE also operates six cash equities exchanges, where customers can trade stocks and ETFs. Some of the most popular contracts traded on ICE’s exchanges include Brent crude oil, WTI crude oil, natural gas, gold, silver, Eurodollar, U.S. Treasury bonds, Euro Bund, FTSE 100, MSCI EAFE, and U.S. Dollar Index.
Clearing
ICE operates six CCPs that provide clearing and settlement services for OTC and exchange-traded derivatives, as well as cash equities and fixed income securities. Clearing reduces the counterparty risk and operational complexity of trading, as the CCP acts as the buyer to every seller and the seller to every buyer, and guarantees the performance of the contracts. ICE’s clearing houses also offer margining, collateral management, and risk management services to enhance the safety and efficiency of the markets.
Data Services
ICE provides a comprehensive suite of data, analytics, and connectivity solutions that enable customers to access, analyze, and act on market information. ICE’s data services include pricing and reference data, indices and benchmarks, valuation and risk analytics, desktop and mobile applications, and network and infrastructure services. ICE’s data products cover a wide range of asset classes and markets, such as fixed income, equities, derivatives, commodities, currencies, mortgages, real estate, and environmental, social, and governance (ESG) factors.
Mortgage Technology
ICE offers a leading cloud-based platform that connects all participants in the mortgage lifecycle, from originators, lenders, and investors, to service providers, regulators, and consumers. ICE’s mortgage technology solutions streamline the origination, processing, underwriting, closing, and servicing of mortgages, as well as the secondary market activities, such as securitization, trading, and risk management. ICE’s mortgage technology products include Encompass, Velocify, Mavent, AllRegs, Simplifile, and MERS.
Customers
ICE serves a diverse and global customer base, including:
Corporations: Companies that use ICE’s products and services to hedge their exposure to various market risks, such as commodity price fluctuations, interest rate movements, currency fluctuations, and credit events.
Financial Institutions: Banks, brokers, dealers, asset managers, hedge funds, pension funds, insurance companies, and other financial entities that use ICE’s products and services to trade, invest, and manage risk across various asset classes and markets.
Market Makers: Firms that provide liquidity and price discovery to the markets by buying and selling securities and derivatives on ICE’s exchanges and platforms.
Market Data Vendors: Firms that distribute ICE’s data products to their end-users, such as Bloomberg, Thomson Reuters, FactSet, and S&P Global.
Regulators: Government agencies and authorities that use ICE’s data and technology solutions to monitor, supervise, and enforce the rules and regulations of the financial markets.
Consumers: Individuals and households that use ICE’s mortgage technology solutions to obtain, refinance, or service their mortgages.
Competitors
ICE faces competition from other operators of financial and commodity markets and exchanges, as well as providers of data, technology, and analytics solutions. Some of ICE’s main competitors include:
CME Group: The world’s largest operator of futures and options exchanges, offering contracts on various asset classes, such as interest rates, equities, currencies, commodities, and metals. CME Group also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
Nasdaq: The world’s second-largest operator of stock exchanges, offering trading in equities, ETFs, options, futures, and fixed income securities. Nasdaq also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
London Stock Exchange Group (LSEG): A global operator of stock and derivatives exchanges, offering trading in equities, ETFs, options, futures, and fixed income securities. LSEG also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
Deutsche Börse: A German operator of stock and derivatives exchanges, offering trading in equities, ETFs, options, futures, and fixed income securities. Deutsche Börse also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
Overall
The Intercontinental Exchange is a leading global operator of financial and commodity markets and exchanges, offering a range of products and services that enable customers to trade, hedge, invest, and manage risk across various asset classes and markets. ICE also provides data, technology, and analytics solutions that support market participants and regulators in making informed decisions and enhancing efficiency. ICE has grown through a series of strategic acquisitions and organic growth, diversifying its product offerings and geographic reach. ICE serves a diverse and global customer base, including corporations, financial institutions, market makers, market data vendors, regulators, and consumers. ICE faces competition from other operators of financial and commodity markets and exchanges, as well as providers of data, technology, and analytics solutions.
If you are looking for ways to invest your money, you may have heard of stocks and bonds. These are two of the most common types of securities that investors can buy and sell in the financial markets. But what are the differences between them, and how do they fit into your portfolio?
What Are Stocks?
Stocks, also known as equities, are shares of ownership in a company. When you buy a stock, you are buying a fraction of the company’s assets and earnings. You become a shareholder, and you have the right to vote on important decisions and receive dividends if the company distributes them.
Stocks are traded on stock exchanges, such as the Nasdaq or the New York Stock Exchange. The price of a stock depends on the supply and demand of the market, as well as the company’s performance, growth potential, and future expectations. Stocks can be classified into different categories, such as common, preferred, growth, value, or dividend.
What Are Bonds?
Bonds, also known as debt securities, are loans that investors make to a company or a government. When you buy a bond, you are lending money to the issuer, who promises to pay you a fixed rate of interest and return the principal amount at a specified maturity date.
Bonds are mainly sold over the counter, rather than on a centralized exchange. The price of a bond depends on the credit quality of the issuer, the interest rate environment, the duration of the bond, and the inflation expectations. Bonds can be classified into different types, such as corporate, municipal, treasury, or junk.
Pros and Cons of Stocks
Stocks offer the potential for higher returns than bonds, but they also come with higher risks. Here are some of the pros and cons of investing in stocks:
Pros
Capital appreciation: Stocks can increase in value over time, especially if the company is growing, profitable, and innovative. You can benefit from the price appreciation by selling your stocks at a higher price than you bought them.
Dividends: Some companies pay dividends to their shareholders, which are regular cash payments from the company’s earnings. Dividends can provide you with a steady income stream and increase your total return on investment.
Liquidity: Stocks are generally easy to buy and sell on the stock exchanges, which means you can access your money quickly if you need to. You can also diversify your portfolio by buying stocks from different sectors, industries, and countries.
Cons
Volatility: Stocks are subject to market fluctuations, which can cause the prices to rise or fall dramatically in a short period of time. Stocks are influenced by various factors, such as economic conditions, political events, industry trends, and company news. You may experience significant losses if the market goes against your expectations.
No guarantee: Stocks do not guarantee any return or income. The company may perform poorly, cut or eliminate dividends, or go bankrupt. You may lose some or all of your initial investment if the company’s value declines or disappears.
Emotional stress: Investing in stocks can be stressful and emotional, especially if you are not prepared for the market volatility and uncertainty. You may be tempted to buy or sell stocks based on your emotions, such as fear, greed, or regret, rather than on your rational analysis and strategy.
Pros and Cons of Bonds
Bonds offer a more stable and predictable return than stocks, but they also have some limitations. Here are some of the pros and cons of investing in bonds:
Pros
Interest income: Bonds pay you a fixed rate of interest, which is usually higher than the interest you can earn from a savings account or a certificate of deposit. You can rely on the interest income to supplement your income or reinvest it to grow your wealth.
Principal protection: Bonds promise to repay you the principal amount at the maturity date, as long as the issuer does not default on its obligations. You can get back your initial investment if you hold the bond until maturity, or sell it at a higher price if the market interest rates decline.
Risk reduction: Bonds are generally considered less risky and more stable than stocks. Bonds have a lower correlation with the stock market, which means they tend to move in different directions. You can reduce the overall risk and volatility of your portfolio by adding bonds to your asset allocation.
Cons
Lower returns: Bonds have a lower potential for growth than stocks, as they are limited by the fixed interest rate and the principal amount. You may miss out on the opportunity to earn higher returns from the stock market if you invest too much in bonds.
Interest rate risk: Bonds are sensitive to changes in the market interest rates, which move inversely to the bond prices. When the market interest rates rise, the bond prices fall, and vice versa. You may lose money if you sell your bonds at a lower price than you bought them, or if you buy new bonds at a lower interest rate than your existing bonds.
Inflation risk: Bonds are vulnerable to inflation, which erodes the purchasing power of your money over time. The fixed interest rate and the principal amount of your bonds may not keep up with the rising cost of living, especially if the inflation rate is higher than the interest rate. You may lose money in real terms if the inflation rate exceeds your bond returns.
Which Should You Choose?
There is no definitive answer to whether you should invest in stocks or bonds, as it depends on your personal goals, time horizon, and risk tolerance. However, here are some general guidelines to help you decide:
If you are looking for higher returns and can tolerate higher risks, you may prefer stocks over bonds. Stocks can offer you the opportunity to grow your money faster and benefit from the long-term growth of the economy and the companies. Of course, these all come with inherently more risk. If you are looking for lower risks and more stability, you may prefer bonds over stocks. Bonds offer you a more predictable and reliable income stream and protect your principal amount.
