TH: What events are you looking for to trigger re-investment in this unusual time? If things get "better" gradually over several years, as opposed to something like a large correction, does it change your plan?
In short: where I am now is going to get me "good enough" returns with limited downside risk even if I stay right where I am.
Long answer:
I'm fully invested right now and the Wellesley fund where the bulk of my money sits is about as appreciative a fund with as low a risk as I can find. Look at the numbers for average annual return for 1, 3, 5 and 10 years: 9.6, 7.2, 6.5, 9.5 and since inception in 1970 at 11%. Better 3, 5 and 10 year numbers than the S&P 500. I wouldnt mind staying in this fund for the duration...especially with a .20% management fee (for the admiral shares i'm in). In 18 years its had 3 down years of -4.1, -4.4 and -1.9%...all small and all in years when bonds took a bath and stocks didnt do so well either. With this investment I also dont worry about "another 9/11"...I'm assuming thats going to happen, and more than once. I'd stay invested even though the "experts" and "professionals" advised everyone stay in there and "dont let the terrorists win", then promptly sold their holdings.
You dont get the big run up money, but the returns are steady, solid, the volatility low, and no stomach spinning drops of 20-30%.
Now, if the fed starts humming the "Raising the rates" song, I might divest half of the Wellesley into cash or the short term corporate. Wait out the rate hikes and NAV drops and go right back in after we see 2.5-3% of hikes. If they take 12-18 months to raise rates, I'm still collecting on the bond portion and the dividend portion of my stock holdings until then.
Separately, If we see a 15-20% drop in US equities, I might divest a portion of Wellesley into US mid and large caps. I wouldnt be hurt by the drop much, because only 35% of Wellesley is in stocks and they're cheap value dividend bearing stocks...the ones that wont go down 25%. I think the Dow should be 7500, the Nasdaq around 1550, and the S&P around 850. I thought at the bottom of the downslide that we were almost fairly valued against historical trends. Yeah, I know, its different this time.
If we see a 20-25% drop in REIT values, I might put 20% of this holding into that and enjoy the fatter yields. If we dont see a drop and REITS keep powering up, thats ok, I have a good size hunk of my IRA in them already.
However, in the absence of any major moves or combination of moves, I might stay right where I am indefinitely. About 1/3 of my port is in reits, foreign stocks and bonds, emerging markets and managed US and foreign small caps...pretty broad diversification...so a 5% drop in Wellesley, or even a 7-10% drop wouldnt make me shiver.
ALL THAT having been said, once one or more of these incidents occurs and I make a change, I'm unlikely to fiddle with the assets any further except for re-balancing. Right now I'd like a little more equity exposure and a little more REIT exposure, and I'd like to sidestep the interest rate incurred value drop in bonds at least partially.