Where to invest with the market at all time highs?

[target2019]

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%.

I consider this page every now and then:

https://eresearch.fidelity.com/eres...ectors/si_business_cycle.jhtml?tab=sibusiness

During a recession the four sectors Utilities, Telcom, Healthcare, Consumer Staples (VPU VOX VHT VDC) are said to perform better. However, expect them to drop as well. One or two large companies in Telcom, for example, might perform better.

 

[target2019]

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.

This graphic shows an ideal, or hypothetical, business cycle. It came from the page:

https://eresearch.fidelity.com/eres...ectors/si_business_cycle.jhtml?tab=sibusiness

Even though I want things to be symmetrical, like the graphic, that cycle gets distorted in all directions by world and U.S. events. The downside of the "roller coaster" track is much steeper, I believe.

I'm indexing, and staying at 55/45, and don't think I am smart enough to time a large move either way. What I can control is where I put new money. And I am very slow on decision making.

 

[Johanson]

I'd go with #2 also. I recently sold DLNG at double my basis w/DRIP and GLAD with a 60% gain the same week due to sell limits I had put in. Anyhoo, even though XLF was at its 52 week high at the time, I shifted all of that money to that. Not sure if it will work out for me but I am long XLF and will let that sit long term unless something drastically changes.

 

[calmloki]

Well, you could stash some portion of your funds somewhere safe. Want to make a bit of dosh while it sits though, so pick a higher interest insured bank. These guys have a pretty high rate, though I have trouble signing up with them. They do claim to be real, and I read it on the interwebs, so...:

https://redneck.bank/mega-money-market/

 

[target2019]

Wow, when I clicked that link and saw a blast of RED I thought I was in a restricted zone. Life can be full of surprises!

 

[NW-Bound]

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

I read the article. The experiment that they conducted was interesting, not because people were fooled with new investments, but with the same old game that they were offered.

People bid up "stuff" not because they really thought it was worth that much but because they believed other people would. In other words, it's the same "the greater fool" premise that inflates bubbles.

 

[audreyh1]

Yep, exactly! That's what it always comes down to, apparently.

 

[UnrealizedPotential]

In the 1999 internet stock craze, I am sorry to say I fell for it. Luckily, I didn't have much money to lose, but lose I did. The 2008/2009 downturn, my holdings went down 55%. I was dollar cost averaging at the time and recovered by 2010. Nowadays, I like cash a lot more than I did in previous years. In March 2009, I heard Buffett say he liked stocks at that time. I had no extra money to invest. So I try and have more cash to invest in times of opportunity. I don't see opportunities now.

 

[Totoro]

Thank you for that link, very interesting. From the link:

Noussair emphasizes, “you don’t just get random noise. You get bubbles and crashes.” Ninety percent of the time.

Basically, it says that people aren't very good in understanding how other people think, especially in fluid and complex situations. And thus its a poor basis for investing (compared to a value based approach).

Wonder if it relates to something I sometimes see in (novice level) playing poker or other games: Many (most?) people reason about others at the one '1 step level'.

E.g. if a poker player never bluffs, the other people start to adjust their behavior ("X never bluffs"). Realizing that however, the original player can actually get away with a little bit of bluffing, as long as it remains undetected. Taking that reasoning step isn't readily done.

Put differently: the average person thinks he's above average capability, and the other players aren't.

I do wonder if there were many situations where an 'asset' was actually undervalued in the experiment. Or is it 'fairly valued or far above' thing?

 

[Turn_the_Page]

I'm sitting WAY over my target AA in cash (probably 40/40/20 instead of closer to 50/50), so my vote is to stay conservative with it. Yes, the market can run a LONG time when it's this way, but is it worth the worry to squeeze a few points out of the portfolio. Only you can answer the question, as you have to live with the result.

 

[Breedlove]

I am in a similar position , I stand with 139,000 in cash . I am with Fidelity my Fidelity guy has told me to hold on to my cash right now and we will see a correction and at that point we will buy . He believes February will see a correction . I won't say this is right but I am going to wait a while and see what happens. ( once again market timing )

 

[JohnnyBGoode]

Interesting feedback! I think the hybrid #2 proposal is the right way - I will invest the cash in a high-interest savings vehicle (I submitted my application for Ally a couple of days ago) and then DCA over the next 6-12 months into my target allocation.

 

[Ticker]

"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. "

Likewise, I think the upside potential from here is very limited, especially when measured against the risk. I am returning to cash with most of my selling trades at record levels. I am moving into I bonds and similar products as I am seeing inflation return into my daily life. Should we get a substantial dip, I'll return, but tentatively. I remember the lessons of 2000.

 

[Dawg52]

"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. "

Likewise, I think the upside potential from here is very limited, especially when measured against the risk. I am returning to cash with most of my selling trades at record levels. I am moving into I bonds and similar products as I am seeing inflation return into my daily life. Should we get a substantial dip, I'll return, but tentatively. I remember the lessons of 2000.

If 75% equities is bearish......I must be a groundhog that saw it's shadow.

 

[NW-Bound]

I recently saw a headline that made me think of this thread. It is about Buffett putting $12 billion into the market. Buffett always keeps a lot of cash on hand, and it shows he is not afraid of buying in this market condition.

However, Buffett is a stock picker, and we will not know what he bought until his company quarterly report comes out.

 

[Sandy & Shirley]

I currently have 15% of my holdings in a single stock, DNP, a select income fund with all of its investments in the energy sector.

The ticker started in early 1987 and its monthly dividend settled in on a monthly 6 cents per share by June of that year. It was raised to 6.5 cents per share in July of 1997 and, other than a few bonus dividends, it has returned that amount every month since.

The stock has consistently sold for $9.50 to $10.50 for most of its lifetime with a few peaks and valleys along the way. Yes, it did dip to $6.15 in December 2008, was back to $9.00 by Aug 2009, and $10.00 by Oct 2010. The important thing is that during that entire market crash period, the monthly dividend stayed at 6.5 cents a share.

The price actually increased from $10.44 to $10.48 over the BRexit market correction!

At $9.50 78 cents a year is an 8.2% return and at $10.50 is 7.4%. It is currently selling at $10.68 today which is only a 7.3% annual rate of return. It was 10.04 in October before the Trump Market Bump.

My strategy has been to keep reinvesting my dividends and buy more when to price dips.

 

[Meadbh]

Some people like to put their cash investments under the mattress, or even inside a big old TV set. The problem is that they may forget where they put it. This forgetful investor got lucky!

$100,000 found inside old TV at Ontario recycling plant | CTV News

 

[kcowan]

This forgetful saver got lucky!

FIFY
Imagine if it was Apple or Microsoft stock!

AAPL Dec 2002 $1
Latest close $135 or $13,500,000

(Hopefully not Electrohome!)