It might be easier to understand, if I were to say I'm going to 100% cash and then re-balance after that.
I'm of a similar mind. I'm largely (~60%) in cash right now, and plan to go moreso. I probably wouldn't be so much in cash, but I missed the opportunity to buy in during the 2008 crash. We sold a couple of houses during that time, but the Dow was back up to the mid to high 9000s before I finished. I thought that was too much of a run up to be buying into. So I've been hanging around waiting for the inevitable (in my mind) double dip.
Could someone explain to me why you wouldn't stick it all in either bonds or CD's in the short-term? I've never quite understood why you concede even the low interest you would get there versus nothing with cash.
By having my cash scattered around in a few banks to keep the FDIC coverage, I'm averaging about 1.2% in savings accounts. I'm only getting about 1.5% in CDs. So I don't see that it's worth the lack of liquidity to tie it up in CDs.And I agree with Brewer and others that bond funds are a relatively risky place to be right now.
Aha, I assumed you were in cash for the long haul, not just market timing. I would lose even more sleep with that approach. When do you get back in? Lets say the market steadily improves instead of double dipping - in December we are at 11,000, 12,000 next summer. Do you figure things have turned around and jump back in (the typical sell low, buy high scenario of panic sellers) or do you keep waiting for 6,000 again?
Yeah, that's what I've been dealing with a lot recently. I just keep telling myself that the more I'm tempted to panic into the market, the more likely it is that it is at a peak. Patience, grasshopper.
To me it sounds more like a combination of market timing eventually followed by dollar cost averaging back into the market over a prolonged period of time.
Yep, that's pretty much it for me. Along with selling the houses, I was working on freeing myself up from my FA and the investments he had me in (high cost, front end fees). I withdrew money from the accounts I had with him to buy the new houses, and didn't give it back to him when I sold the old ones. I put it in VG for a while, but when I realized the modified DCA opportunities wouldn't be coming right away, I moved much of it to higher interest paying institutions. I like the DCA concept, just can't bring myself to start at what I consider a high priced market. And yes, I understand the lack of logic in that.
I'm still moving even more to cash, bit by bit. The FA still has some of the money, including some in an IRA. What I'm doing there is pulling it out of the investments he has it in, and convert it to cash in the Roths in VG. I'm doing this now because I'm in a very low tax bracket for now, and can convert money deferred at 25-28% at a 10-15% bracket. I'm tempted to go all the way to the top of the 25% bracket though, to get it done faster. But I haven't decided that one yet.
Overall, I agree with Dex. I don't see a lot of upside potential for now, and do see a lot of downside potential. I'm tending to go with my gut, though, more than analysis. I just think we're in for some fairly dark days in the near term. The hard part, as always, is when to get back in. For me, I plan to start DCAing when the S&P is below 950. I'm sure it will be someday.
Edit: My plan is that once I'm DCAing into the market, I'll go with my planned AA, then stay in that and rebalance for the foreseeable future. I want to be a good AA investor, I just can't see pulling the trigger into what I'm expecting to be a high in the market.