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Saturday, March 19, 2011

Should longterm investors begin accumulating green mutual funds?

While it is true that anytime is fine for starting a dollar-cost-averaging (DCA) mutual funds investment program, it is also a fact that there are specific times that provide more profitable entry points, and these are obviously the months after extreme declines. Also, the maxim "never try to catch a falling knife" does not apply to DCA, as that is precisely what would provide the biggest gains. Imagine going fully invested after a 15% drop and then seeing the market fall a further 28%; that's obviously a big negative. Now imagine instituting a $100 (or $500 etc) per month automatic investment plan after that first drop; your 2nd, 3rd and 4th purchases are likely to be at tremendous prices, positioning you for solid longer term growth.

Let's address the question in the title of this post: Should longterm investors begin accumulating green mutual funds?

My advice would be yes, especially if you do not have positions currently. The 3rd year in the USA presidential election cycle is usually a down year, as the honeymoon is long over and it's too soon to really pump and prime the economy for an election. This means that between now and early December the overall direction could be down, meaning more and more shares will be accumulated at lower and lower average prices. Based on historical charts, there would then be profitable selling opportunities three to seven years later, meaning that investors with time horizons of ten to fifteen years can safely start building equity via DCA programs.

The greed and corruption of the Bush years created a decade of stagnation in USA stock market values, whereas the visionary leadership of Barack Obama is likely to kick off a lucrative bull market in the twenty-teenies.

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