FYI: What should an investor do when all asset classes appear overpriced? The 10-year U.S. Treasury bond currently yields about 2.6%, much lower than the 5% historical average and only slightly higher than the Federal Reserve’s 2% inflation target. Yields of lower-quality bonds are unusually meager compared with those of traditionally safe Treasurys.
Regards,
Ted
http://www.cetusnews.com/news/How-to-Invest-in-an-Overpriced-World.ByLWlySBz.html
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In general, staying the course in a broadly diversified portfolio is the best strategy when all asset classes appear overpriced. If rebalancing is required to constrain portfolio risk, consider REITs and preferred stock. Good-quality preferred stocks yield about 5%, and many have yields that float with interest rates, so that they offer some protection if rates rise in the future. Mid-single-digit returns may seem unattractive relative to recent asset returns, but with valuations at current levels, low-single-digit returns could end up looking good.
Malkiel is always an informative read. Diversification works regardless of the market direction although care must be exercised when doing the required asset allocations such that not too much anticipated return is sacrificed to achieved the desired diversification.
Here is a Link that provides the required returns and correlation coefficient historical data that will guide your decisions in doing the asset allocation distribution:
https://www.portfoliovisualizer.com/asset-class-correlations
This table is extremely useful. Work at it and prosper.
Best Wishes
Timeframes for the correlation coefficients don't matter. The ever changing and random character of the correlation coefficient and returns data demonstrate the futility in making market projections. It just can't be done with any accuracy or consistency. Change happens. That's why just being in the markets over long timeframes is a winning strategy.
The referenced data sets serve to reinforce the diversification concept in a very general sense. Given the overall market uncertainties, precision is simply not possible. Asset allocation mathematical programs that promise some optimum return at minimum volatility don't holdup over time. They fail because of change. Nothing more than a very general asset allocation is possible with some infrequent adjustments to follow a general, generic plan.
Thanks for your question. Sorry but I don't practice a tight discipline. When investing, there are few math derived "rules" that work all the time. Again, change happens!!
Best Wishes
After posting, I remembered a bit of wisdom from a Norm Augustine book that I own: "90 percent of the time things will turn out worse than you expect. The other 10 percent of the time you had no right to expect so much.” He made a ton of similar observations in his superior book with wisdom on every page. The book is titled "Augustine's Laws". The law quoted is number 37 from the 52 provided in the text. It took some serious hunting, but I finally found the book.