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FYI: WHAT’S A GOOD REASON to dial down your stock market exposure? A year after Donald Trump was elected president, many folks are still smarting from their decision to bail out of stocks. Clearly, we shouldn’t lighten up on shares just because we don’t like the guy in the White House. Regards, Ted http://www.humbledollar.com/2017/11/all-the-right-reasons/
I see this narrative a bunch. Yes - forward PE ratios are high. But not when considered against inflation. And earnings yields are more than twice treasury yields.
Context is everything.
The market climbs a wall of worry built on a bedrock of statements like "stocks are too expensive." As Clements wrote: "I’ve been writing about the stock market for 32 years, and in every one of those years folks have complained that stocks were expensive."
I cannot remember the last time anyone here seriously discussed what used to be the common investment risk parameters. Those are considerations like age, years to retirement (or years in retirement), risk tolerance, additional assets or sources of income, and one’s overall situation. It’s not something you turn “on” or “off” depending on whether you believe in Trump, like the economy, or think equities are going higher or lower. Those basic parameters (actually constraints) have always existed and been important. I can’t tell you we’ll enter a prolonged bear market this year or next. I can, however, assure you there will be another one someday. Acceptance of that reality is the only reason I can think of why risk exposure / asset allocation should be a consideration for most.
My university employer recently sold most of my Fidelity funds (I was limited to TIAA or Fido, I chose Fido) and placed my money in Vanguard index funds (not previously available and probably not the best time to invest in index funds), but all my European and Asian bond funds seemed to become stateside, so I sold the bond funds and went to cash for that amount aside from (over)restoring my investment in FNMIX. Minus 1.3% later, I'm happy with the cash funds. The only Fido fund of my multiple holdings they held was Contra, FWIW. Now, i assume they had good consultants, and I really like Vanguard, but I do wish they had access to Primecap and Capital Opp, which I hold in an IRA. Since I am retiring next year, and since I remember an episode in the late 70's when one of Rukeyser's panelists said the market was a "table pounding buy" (he was correct), I feel confident that people with a long horizon (like Eric Cinnamond, whose blog I read) who aren't trying to time the market, are saving their money. If you are very (remember that you are competing with smarter people with computer programs) sure you have a have a hot stock, don't buy more than you can afford to lose .
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From the article:
"No doubt about it, stocks today are expensive."
I see this narrative a bunch. Yes - forward PE ratios are high. But not when considered against inflation. And earnings yields are more than twice treasury yields.
Context is everything.
The market climbs a wall of worry built on a bedrock of statements like "stocks are too expensive." As Clements wrote: "I’ve been writing about the stock market for 32 years, and in every one of those years folks have complained that stocks were expensive."
The only Fido fund of my multiple holdings they held was Contra, FWIW.
Now, i assume they had good consultants, and I really like Vanguard, but I do wish they had access to Primecap and Capital Opp, which I hold in an IRA.
Since I am retiring next year, and since I remember an episode in the late 70's when one of Rukeyser's panelists said the market was a "table pounding buy" (he was correct), I feel confident that people with a long horizon (like Eric Cinnamond, whose blog I read) who aren't trying to time the market, are saving their money.
If you are very (remember that you are competing with smarter people with computer programs) sure you have a have a hot stock, don't buy more than you can afford to lose .