It’s easy to make oodles of money from the stock market, many people say. Just buy low, sell high -- four words to propel you to millionaire status.

The problem with buying low and selling high is how to spot the bottoms and the peaks. Among market insiders, claims of calling the bottom and finding the peak are often met with discreet coughs or raised eyebrows.

Consider this: 28-year old Ryan (not his real name) invested P600,000 in an equity mutual fund in 2006. He became a millionaire in early 2007.

Around June last year, a brokerage firm’s forecast that the market will go up to 4,400 fueled more buying frenzy. Despite news of the subprime mess from the US, Ryan kept buying until the reality stared at him in the face. The market has tanked and the bottom is not yet in sight. He lost all his gains along with his newfound self-esteem.

They say the worst mistake in a falling market is to realize the loss by selling low and Ryan knows that’s exactly what he’ll get now if he sells. But watching his hard-earned money disappear is a nerve-wracking torment that makes him wonder whether it’s time to quit.

Sunlife Financial president and chief executive officer Henry Joseph M. Herrera says investing with the herd always ends in tears. “The behavior of most people is that when markets are high, that’s when they come in. When everybody’s talking about the stock market and people see someone on television becoming a millionaire. We are more like a contrarian,” Herrera said.

In the legendary Peter Lynch style of contrarian value investing, Herrera recounted how he kept 80 percent of his funds in money markets last year and people thought he was crazy.

“Now, I’m into equities. When everybody’s bullish, we get out. When there’s blood on the streets, we get in,” Herrera says.

Although he is an actuary who can do both technical and fundamental analysis, Herrera says he doesn’t worry about finding the bottom and the peak.

“Do not be dissuaded by these volatile times. The technical analyst may say this is not yet the bottom. I don’t care. Who knows where the bottom is as long as my horizon is three to five years. Within the next three years –- within and not at the end – a 4,400 is not an impossibility,” Herrera said.

If it takes the market four years to reach 4,400 from 2,400, that’s still a 15 percent return per year, yields that bank deposits and other investments will be hard pressed to much.

In fact, Herrera suggests investing a set amount regularly –- whether P5,000 or P50,000, it depends on how much you can set aside regularly –- all the time ignoring whether the market is heading north or south. The strategy, called peso cost averaging, is best expressed in Filipino: pikit-mata investing.

The idea is that your P5,000 will buy more shares when the market is low; less shares when stocks are flying high. Bunch that off in time, and you will always get a lower cost than if you invested everything in one go.

Peso cost averaging is supposed to make market volatility work for you. It can also take off a lot of the stress.

“In the lower part of the market, emotion is high in terms of fear and desperation that all people are doing is just to unwind themselves. Stop the bleeding, I’m having nightmares everyday, cut it all out,” says Juanis Barredo, vice president of CitisecOnline.com.

The answer to the torment: don’t go through it. Barredo says be patient and wait it out. It will take time to go up anyway, so you have all the time in the world to recover.

CitisecOnline.com is coming up with new facilities to help clients stick to peso-cost averaging, using technology to remind investors and make it as easy as clicking a button. He says this is the best time to start such a strategy because the market is declining.

“Don’t expect miracles from the market in this situation. This is the time when you want to buy issues at their cheap levels,” Barredo says.

Figures from CitisecOnline.com shows that if you begin peso-cost averaging in the beginning of the bull market in 1990, the index would have given you 257.12 percent return while Treasury bills would have given you 151.52 percent.

A basket of carefully chosen stocks that include Ayala Corp, Bank of the Philippine Islands, Metropolitan Bank & Trust Corp., San Miguel Corp., and Philippine Long Distance Telephone Co., on the other hand, would have given you a 1,833.35 percent return from 1990 to 2007.

“The index’ returns were not that bad, but if you are investing for that long, you would want to have quality gains. This tells me that the index itself may not be the answer. You might need a list of stocks that are the preferred choice,” Barredo said.

Beginning cost averaging at the height of a bull market, on the other hand, still shows the same results – although with lower gains. From 1997 to 2007, the index would have added up to a 4.58 percent return, while the 91-day Treasury bill yielded 47.77 percent. The basket of equities, on the other hand, would have earned 205.71 percent over that period.

“The trick is position into the right company. In every single bull and bear market that will come, this will go higher and higher and higher,” Barredo said.

There are critics of cost averaging, though, who say that it may work for some in certain periods of time, but not all the time. Barredo said the problem with cost averaging is that it takes a lot of time to show results – and Filipinos are not good at waiting.

“The biggest dilemma is waiting for time. We are all short-term in view. But if you are saving for your future, for your retirement, for your kids education plans, getting time on your side is the whole point,” Barredo said.