When I manage my investment portfolio, especially with mutual funds, I use the 200-day moving average (200-DMA) as one of the few technical indicators I actually trust. It helps me stay focused during market noise, and I’ve found it useful for timing entry and exit points — especially when looking at stock-heavy or sector mutual funds.
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What Is the 200-Day Moving Average?
The 200-day moving average is the average closing price of a fund or security over the past 200 trading days. It’s one of the most widely used trend indicators in finance. I use it to filter out short-term volatility and gauge the long-term trend of a mutual fund’s net asset value (NAV).
Why 200 Days?
There are about 252 trading days in a year. The 200-day average removes the top and bottom extremes and focuses on the core of market behavior. I’ve found that it’s long enough to identify sustained trends but not so long that it lags.
How to Calculate the 200-Day Moving Average
The formula is straightforward:
\text{MA}{200}(t) = \frac{1}{200} \sum{i=t-199}^{t} P_iWhere:
- P_i = NAV (or price) of the mutual fund on day i
- t = current trading day
So if I want to calculate the 200-day moving average for today, I add up the NAVs for the past 200 days and divide by 200.
Example: Calculating the 200-DMA for a Mutual Fund
Let’s say a mutual fund has the following simplified NAV history over 5 days:
| Day | NAV |
|---|---|
| 1 | $100.00 |
| 2 | $100.50 |
| 3 | $101.00 |
| 4 | $101.50 |
| 5 | $102.00 |
The 5-day moving average (for simplicity) would be:
\text{MA}_{5} = \frac{100 + 100.5 + 101 + 101.5 + 102}{5} = 101In real use, I pull 200 days of NAV data using Yahoo Finance or Morningstar, dump it into Excel or Google Sheets, and use the =AVERAGE(range) function to get the 200-day MA.
How I Use the 200-DMA in Mutual Fund Investing
1. Identifying Trend Direction
If a mutual fund’s NAV is consistently above its 200-day moving average, it often signals an uptrend. If it’s consistently below, I see it as a downtrend.
| Fund A | Fund B |
|---|---|
| NAV > 200-DMA | NAV < 200-DMA |
| Bullish | Bearish |
This simple rule has helped me avoid entering funds in prolonged drawdowns — especially in sector funds like energy or tech.
2. Buy and Sell Signals
Here’s how I interpret crossovers:
- Golden Cross: When a fund’s 50-day moving average crosses above its 200-day moving average → possible buy signal.
- Death Cross: When the 50-day average crosses below the 200-day → possible sell signal.
These patterns aren’t guaranteed, but they’ve historically aligned with major turning points in equity mutual funds.
Chart Example: VFIAX (Vanguard 500 Index Fund)
| Date | NAV | 200-DMA |
|---|---|---|
| Jan 2022 | $408 | $395 |
| Mar 2022 | $390 | $398 |
| Jun 2022 | $365 | $385 |
| Oct 2022 | $340 | $370 |
| Jan 2023 | $375 | $360 |
What this shows is that during early 2022, VFIAX dropped below its 200-day moving average — a sign of a bearish trend. It stayed below until early 2023, when it began to recover and cross above again.
I don’t make decisions solely based on this crossover — but I use it as one piece of evidence.
200-DMA vs Other Indicators
| Indicator | Timeframe | Best For | My Usage |
|---|---|---|---|
| 50-DMA | Short-Term | Fast swings | Rarely |
| 100-DMA | Medium | Intermediate trends | Occasionally |
| 200-DMA | Long-Term | Big trend shifts | Regularly |
| RSI | Momentum | Overbought/oversold | Sometimes |
| MACD | Trend/Momentum | Entry/exit timing | Sparingly |
The 200-DMA is the most stable — I trust it more than most indicators because it’s slow-moving and avoids false signals.
How It Applies to Different Fund Categories
Here’s how I apply the 200-DMA based on fund type:
| Fund Type | 200-DMA Reliability | My Strategy |
|---|---|---|
| U.S. Large Cap Equity | High | Use as primary trend tool |
| Small Cap | Moderate | Use with volatility filters |
| Sector Funds (e.g., Energy, Tech) | High | Very helpful |
| Bond Funds | Low | Not useful due to NAV stability |
| Target Date Funds | Low | Ignore — they’re allocation-based |
So for bond or balanced funds, I don’t care about the 200-DMA. But for something like Fidelity Select Energy Portfolio (FSENX), it’s invaluable.
How I Track 200-DMA
You don’t need Bloomberg to do this. Here’s how I track it:
Tools I Use
- Yahoo Finance: Search any fund → click “Historical Data” → export 200 days of prices
- Morningstar: Use NAV chart and overlay moving average
- Google Sheets: Use
GOOGLEFINANCE()to pull price data and calculate the moving average dynamically
Example formula:
=AVERAGE(OFFSET(B2,COUNTA(B:B)-200,0,200,1))
Real-World Application: Energy Mutual Funds
Let’s say I want to invest $20,000 in an energy mutual fund like Vanguard Energy Fund (VGENX). I want to avoid buying at a local high before a crash.
By plotting its 200-DMA, I notice the fund has just crossed above it — signaling recovery. That might suggest it’s safer to enter now than during a steep decline.
Risks and Limitations
- Lagging Indicator: The 200-DMA reacts slowly. It won’t catch sharp reversals early.
- False Signals: Especially during sideways markets, funds can oscillate around the average, giving mixed signals.
- Not for All Funds: Bond funds or multi-asset funds don’t benefit much from technical trend tools.
That’s why I never use this in isolation — I always combine it with fundamentals and my investment timeline.
Final Thoughts
The 200-day moving average won’t predict the future. But for me, it acts like a weather report. It doesn’t tell me exactly what’s coming next, but it helps me dress for the conditions.
If you’re evaluating mutual funds, especially U.S. stock-focused ones, using the 200-DMA can help you avoid bad timing and enter when momentum is on your side.
