Where to invest with the market at all time highs?

[JohnnyBGoode]

Hi Market Gurus ! I'd love to get your advice.

I currently have about $160K sitting in "cash" in my investment portfolio. $130K of it is in a taxable account and $30K of it is in a tax-deferred account.

I don't need the money any time soon (>7 years). I've got an overall portfolio allocation of:
30% Bonds - Spartan U.S. Bond Index Fund (FSITX)
5% Real Estate - Spartan Real Estate Index Fund (FSRVX)
35% US Stocks - Spartan Total Market Index Fund (FSTVX)
30% International - Spartan International Index Fund (FSIVX)

I could just allocate the money into the funds I've got and be done with it (Bond going to tax-deferred account, rest going taxable) but I'm a bit skittish because of the recent market highs. While I try to think long term and not time the market, I'm having a hard time pulling the trigger on purchasing more given how frothy the market is.

So any ideas? I think my options are:
1) Do nothing, just let things ride as they are for a while
2) Allocate the cash into my existing portfolio allocation because not trying to time the market means not trying to time the market
3) Put the money into a "high" interest savings account at Ally or something similar making 1% (seems better than #1 option regardless, I suppose)
4) Put most if it into equities (FSTVX or FSIVX) because the market isn't done yet
5) Put most of it into bonds because they are cheap right now
6) Some other choice I haven't thought of.

Thanks - appreciate your thoughts and consideration!

 

[LOL!]

The stock market is close to all-time highs most of the time because it has an upward progression, so that is not a good excuse to be skittish.

I'd vote for your #2 and follow your asset allocation plan.

 

[Big_Hitter]

is this a pole?

 

[GrayHare]

You might look at sectors to find which are yet to participate in the rally.

 

[Nature Lover]

If having the funds in cash or savings helps you to sleep at night, there's nothing wrong with that. If, however, you want the funds to be put to work, I'd vote for #2.

 

[W2R]

I like this one, and this is how I handle things:

2) Allocate the cash into my existing portfolio allocation because not trying to time the market means not trying to time the market

 

[DrRoy]

+1 for #2.

 

[NW-Bound]

You might look at sectors to find which are yet to participate in the rally.

+1

This, I would do. It requires one to be a stock picker, or at least a sector picker, in addition to being called a market timer, but that never scares me.

Examples of sectors that I overweight right now include biotechs and emerging markets.

 

[Lakedog]

+1

This, I would do. It requires one to be a stock picker, or at least a sector picker, in addition to being called a market timer, but that never scares me.

Examples of sectors that I overweight right now include biotechs and emerging markets.

+2

Another sector I am overweight currently is energy, mainly through VDE but also a couple of individual stocks.

 

[Dawg52]

Not a recommendation, but I'm doing nothing and letting it ride. Of course I've been doing that for the last up 2000 points so what do I know. I am in stocks, but below my desired/target allocation.

 

[JohnnyBGoode]

Thanks everyone for your replies. I very much liked LOL's comment that given the market's general upward trend anyway we are generally near highs anyway. I will go forth with my option #2, though I might send out another thread at some point about the right low-cost bond fund to invest it.

Amazing group, as usual!

 

[sengsational]

I very much liked LOL's comment that given the market's general upward trend anyway we are generally near highs anyway.

While I probably would go with #2 as well, I kinda don't think you should base it on the "general upward trend" idea.

The PE10 averages about 16, and it's at 28.46 today. For reference, before the 1929 market crash the PE10 was about 30, and in the 1970's and 1980's, it was in the 10 range. I've convinced myself that altering my asset allocation based on PE10 isn't market timing, but really, it is, hehe!

 

[Hamlet]

I'm pretty bearish right now, and have been increasing my cash position. The combination of very high valuations, low earnings growth, and potentially catastrophic policy ideas out there (trade war anyone?) has moved me from about 95% stocks to 75% stocks.

I guess 75% stocks isn't really bearish compared to most people's allocations though. I figure it is better to get my allocation to a more comfortable risk level at a market high than to wish I had after a big drop.

 

[Sunset]

OP - Certainly favors Spartan stuff.

I have recently bought some BSJJ , otherwise nothing jumps out at me as a screaming buy at this time.

Not that BSJJ is a screaming buy, but it seemed like a safe buy (as you get your investment back).

 

[UnrealizedPotential]

I will tell you what I'm doing right now. I am still investing in the market. I am not moving any money around at all. Saving a little bit in case of a decline, and sitting tight. I am not feeling overly confident in the market right now.

 

[Totoro]

I'd go for number #2 but with a small twist: Consider phasing it in over a year or two.

Minimizes regret in case of downswing, and gets you moving.

 

[target2019]

I go with #6. Put it into high-yield savings. Then break it down into a certain number of moves, and invest a set amount regularly. Me, I'd take 5-10K each month and spread it out into current funds to maintain the AA. You could accelerate or decelerate as you wish.

 

[GalaxyBoy]

I think I heard this since the 1980s. If the market is moving up, it is, by definition, at a record high. I'm in the "stay the course, think long-term" camp. I was in my 20s when the Crash of 1987 happened, and it taught me that "don't panic" was the best advice I ever received.

 

[tulak]

I think I heard this since the 1980s. If the market is moving up, it is, by definition, at a record high. I'm in the "stay the course, think long-term" camp. I was in my 20s when the Crash of 1987 happened, and it taught me that "don't panic" was the best advice I ever received.

And the times that you don't hear it, the market is crashing and you don't buy because, well, the market is crashing.

I'd probably DCA over a year and call it good. I know that historically, lump sum is better, but I got burned by this in 2008. More important is defining the right equity/fixed income mix and then staying the course.

 

[ejman]

Another vote for #2. An asset allocation approach (50/50 in my case) has helped me tremendously on the what to do question over the last many crises and market tops. There is always something. I don't do anything unless things get way out of order (10% bands in my case since I'm lazy and don't want to have to react to every minor wiggle)

 

[GrayHare]

Another option for those concerned about lofty equity levels is to shift toward more conservative stocks such as utilities. A utility-heavy portfolio barely noticed the 2008/2009 rout. As a sector, Utilities are up only 1.7% during the past 3 months, while by comparison Transports are up over 20%.

 

[NW-Bound]

Another option for those concerned about lofty equity levels is to shift toward more conservative stocks such as utilities. A utility-heavy portfolio barely noticed the 2008/2009 rout. As a sector, Utilities are up only 1.7% during the past 3 months, while by comparison Transports are up over 20%.

+1

Not all sectors participated in the ongoing rally. The main reason I like to buy individual stocks and sector-specific ETFs is that I like to see their relative movements. I love to be able to spot a bargain.

Many sectors that rally the most recently are the ones that have not been doing that well in the recent years, so I am not selling them either. I am still not ready to sell my winners to put more down on utilities though.

 

[haha]

+1

This, I would do. It requires one to be a stock picker, or at least a sector picker, in addition to being called a market timer, but that never scares me.

Examples of sectors that I overweight right now include biotechs and emerging markets.

This is sometimes tricky, but a general principle is that sector prices vary more than sector prospects, and price (as PE or similar) can be known, while sector prospects are off in the future. It takes some nerve, for example to buy EM now, but this would be likely to pay off. The idea is that the future is unknown, but the PE is known. Also, for reasons having to do with human behavior, this is never going to be a popular strategy, which is mostly good.

Ha

 

[NW-Bound]

I have always tried to be a contrarian ever since I saw the folly of the tech stock mania in 1998-2000. One could read all he could about the Dutch Tulip Mania, and still said this time was different when seeing people piled onto tech stocks and dot-coms.

That said, the pitfall I have encountered doing this is being too early. The stocks often continue to go down after I buy, and it is very discouraging. Secondly, a sector may stay in the doldrums for a few years, and too much money putting there means lost opportunities elsewhere. Buying too early and one's return gets hurt and he ends up trailing the market. He may eventually get vindicated and beats the market in a subsequent year, but the overall performance may not be that great.

So, I have learned to be patient and to buy and sell gradually. An economic cycle of a sector takes a few years, not months.

 

[audreyh1]

On stock manias: Apparently even seasoned investors who have been through bubbles before and "learned" from them, still fall prey to bubbles when a new financial instrument becomes available and "hot".

Why asset bubbles are a part of the human condition that regulation can’t cure - Pop Psychology - The Atlantic