Our savings plans made a very handsome profit from September onward by dollar cost averaging in emerging markets. We sold out in May and switched to a US$ money fund. New monthly premiums have been redirected to oil and resources funds. These funds we believe will offer major discounts in the next few weeks as the market corrects. Long term, the extra units that these funds buy will convert to profit as the market recovers.
Risk is relative to the amount invested. Investing a monthly premium in order to buy discounted units makes absolute sense. But it only makes sense if capital sums are protected. Monthly savings invested for long periods become capital.
The best environment for a monthly investment is high volatility which is counter to the best environment for a lump sum. Capital needs smoothed growth. That was why we sold out to cash in May and started a new phase of monthly contributions into the aforementioned commodity funds.
Last night the equity markets in Europe and the US lost over 2.5% and this morning, the Nikkei is down almost 3%. Who knows whether this is a minor correction in a new bull market or whether the bull was (as many of us suspect) a bear in disguise?
These questions will be answered in the fullness of time. I'm just glad that my clients money is safe and out of it.
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