Investment Article Critiques (2) - Essay Example

These are Mutual funds with a variant dollar cost averaging. Currently many investors have made the decision to “go to cash” until the market stabilizes. Many have seen their mutual funds decline anywhere between 25% and 50% over the past years and are gun shy to reinvest at the moment leaving $8.85 trillion dollars in cash (Martin & Tsang, 2009, p. F3). The two approaches are to put all your money in at once at take the risk that it will rise or fall or, as with the variant of dollar cost averaging “a certain percentage of the investors money is invested each month for the next five or six months.

” (2009, p.13) This can help mitigate the all at once method by using the average of the several timed investments to create a better percentage of return overall. However, both require a certain amount of overall risk in this particular market and while dollar cost averaging may help, if the market has not stabilized or bottomed out yet, both methods could still result in short term losses. While cash may still be king for some time yet, the only tried and true method of investment is, “Don’t Panic” as most down markets have proven the turnaround, if you can wait for it, far outweighs any reinvestment strategies in the long run.

As mentioned in the previous article review there is over $8.85 trillion dollars in cash floating around in various accounts like money markets and bank deposit accounts, earning rock bottom interest, many as low as .1% annually. However, as investors see it, it is safe from the market at this time. The current Federal Reserve data states that this is, “equal to 74 percent of the market value of U.S. companies, the highest ratio since 1990.” (2009, p. F3) Talk about a real stimulus package!

Martin and Tsang review several investments that have beaten the odds in 2008 and made money and offer this as the stimulus to investors to qualm