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Ever since the end of the last bear market ended in 2009, stock market experts have been telling us that the stock market is overvalued and headed for a huge drop. Get out now! (they tell us)
These are important people who are on TV and have a national reputation.
Finally I listened in 2012 and bailed out to save myself. What would have happped to my total stock market mutual fund since then?
Are there sectors that are overvalued? Sure, but comparatively a lot of those same people are using "old-school" of thought and trying to apply to a new paradigm. Maintaining a balanced overall portfolio and proper risk management will keep you from losing a lot, most of the talking heads on TV, were either fund managers who let's be honest if they were any good, they'd still be doing it or are journalist majors who got interested in finance. Most will offer insight, but ANYONE who declares this is a top/bottom from an overall market is really just guessing. You can look at what the market is pricing in, what the "smart" money is doing and what institutional is doing to give an indication on market movement, but the only for sure indicator of any definitive call is to tell you, that person doesn't know what they are doing and to ignore them.
Should you always be hedged, to a point. Should you have risk management techniques in place, always. Should you take anyone's self proclaimed "expertise" and call as gospel...never.
The real experts (Warren Buffet, Jack Bogle, etc) are the ones I pay attention to. It's always a good idea to review one's asset allocation and make sure everything is aligned to horizon and risk. None of these experts suggest getting out of the market, Bogle has hinted a lower equity exposure might be warranted at this time, but all or nothing is not a prudent path and even he says not to get out of the market.
I invested in some additional ETFs a few weeks ago, within 1% of their current best ever closing, as it turns out, and I know I'll probably see a drop, possibly a big drop. The alternative was waiting, and that didn't seem like a good thing to do as a long term investor. It's hard at times to keep going, keep investing, at the times the market is way, way up and you've gone through crashes before.
Ever since the end of the last bear market ended in 2009, stock market experts have been telling us that the stock market is overvalued and headed for a huge drop. Get out now! (they tell us)
These are important people who are on TV and have a national reputation.
Finally I listened in 2012 and bailed out to save myself. What would have happped to my total stock market mutual fund since then?
It's not that hard to figure out. You can look this stuff up online.
The total stock market index went up over 33% in 2013. Over 12% in 2014. .42% in 2015. 12.67% in 2016.
You missed out.
If you get the urge to bail, take a small amount off the table and put it in bonds or cash. Something like 1% to 5%. And do that once a year until you get to 50% stock and 50% bonds. Most people will still need to be at least 50% in stocks if they want their money to grow. If the market goes down, move some out of bonds and back into the market. The key is to make modest moves.
getting out is easy . it is getting back in that burns you .
so many sat on cash waiting for that drop. and waited and waited and human nature is to throw in the towel eventually and just buy in higher than you should have and could have .
it is a story that repeats over and over .
p/e's were so high back in 1982 that investors shied away from stocks .p/e doubled in 2 years . with double digit interest rates they proclaimed markets were way over valued .
well who knew interest rates were going to be a big catalyst and kick off the greatest bull markets in history .
p/e's are actually on the way down as earnings have been very good and expected to rise even more .
Posted by mysticaltiger: If you get the urge to bail, take a small amount off the table and put it in bonds or cash. Something like 1% to 5%. And do that once a year until you get to 50% stock and 50% bonds. Most people will still need to be at least 50% in stocks if they want their money to grow. If the market goes down, move some out of bonds and back into the market. The key is to make modest moves.
Great advice. Modest moves for the win! 50% is a good asset allocation to assuage the jitters, and will make any big drops more palatable. Nothing wrong with backing off of an allocation that might feel too aggressive in the near term. If that allows someone to stay in the market and avoid panic, then it's a good strategy.
2000, 2008 etc... I have never bailed because I wouldn't know when to get back in. Honestly, that's my reason. As a result, keep on investing is my way, which seems to work so far.
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