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General Investing => Stocks And Index Funds => Topic started by: defomcduff on September 09, 2018, 06:33:02 PM

Title: Is the stock market overvalued (2018)?
Post by: defomcduff on September 09, 2018, 06:33:02 PM
Hi everyone!

I've been struggling with investing recently, because I feel that the U.S. stock market is significantly overvalued.  The problem is that I've felt this way for several years now, at least since 2015-2016.  Yet, I can't bring myself to be in it with a meaningful share of our family's portfolio.

I understand that we can't time the market perfectly, but I'm concerned about big losses.  Mostly based on long-term value metrics like 10-year Shiller P/E.

Are others concerned?  Do we hold our noses and invest anyway?  Should we dollar cost average even at high valuations?  For context I'm about 60% US real estate + 40% cash / bonds, very little in stocks (except some retirement).

All thoughts appreciated!

DeForest
Title: Re: Is the stock market overvalued (2018)?
Post by: Jeffolucky on September 09, 2018, 08:27:19 PM
I've struggled with that cash problem too. Have too much cash Nit invested and feel market is too high to jump in. I've started moving that cash to CD's returning 2.5 to 3.35 % until the market cools off some. Better than making nothing and taking the risk away.
Not sure it is the best answer, but better than just sitting on the cash.
Title: Re: Is the stock market overvalued (2018)?
Post by: Jamie on September 09, 2018, 09:50:43 PM
What helps me is thinking about my end game. I'm not investing for short term profits. I have a very long goal of building my assets and don't plan to touch them for at least another 30 years. So that has helped me not worry so much about the swings here and there. I believe the markets will be higher in 30 years than they are today so I'm legging in a little each month.

Are we due for a correction? It's definitely possible. But for me putting my money to work each month has kept me disciplined and prevented me from sitting on too much cash or overspending.

Think about your time horizon goals with investing and try to find an allocation that's diverse enough to help you sleep at night. I don't think it's bad to hold some cash if one is diversified enough that cash isn't the majority of one's assets bc of inflation. Investing is so personal though and we each have different tastes for risk.
Title: Re: Is the stock market overvalued (2018)?
Post by: Sam on September 09, 2018, 09:53:41 PM
Quote from: Jeffolucky on September 09, 2018, 08:27:19 PM
I've struggled with that cash problem too. Have too much cash Nit invested and feel market is too high to jump in. I've started moving that cash to CD's returning 2.5 to 3.35 % until the market cools off some. Better than making nothing and taking the risk away.
Not sure it is the best answer, but better than just sitting on the cash.

I've been accumulating cash and socking away a lot in 2.5% 12-month CDs. That's a decent rate now. My asset allocation overall is about 60/40 stocks/fixed income.

Title: Re: Is the stock market overvalued (2018)?
Post by: defomcduff on September 11, 2018, 11:06:33 AM
Terrific - you've encouraged me to put more in 12-month rolling CDs for now.  2.5% ain't bad.

Quote from: Sam on September 09, 2018, 09:53:41 PM
I've been accumulating cash and socking away a lot in 2.5% 12-month CDs. That's a decent rate now. My asset allocation overall is about 60/40 stocks/fixed income.
Title: Re: Is the stock market overvalued (2018)?
Post by: Dario33 on September 11, 2018, 11:26:17 AM
I've been looking at Treasury notes recently.  They frequently come in 3, 6, 12 month terms and the rates are attractive right now.  Plus, they're exempt from state income tax.  You can usually buy directly through your brokerage account.
Title: Re: Is the stock market overvalued (2018)?
Post by: Bonsai on September 29, 2018, 10:08:00 AM
I prefer to look at a different issue, i.e., whether the bull market over?  Valuation is a matter of timing.  Wall Street pundits predict (FWIW) a DOW (using the DOW only as a convenience) going to 30,000 in the next 12 months or so.  If the DOW rises to 30,000 and there is then a 10% correction (by definition) to 27,000 the DOW is presently within a rounding error of that level (26,458 close on Friday); 20% decline (a bear market by definition) to 24,000 and the DOW is currently about 9% hogher.  Even assuming a 20% drop in 2019, I still suspect the DOW will be back to 27,000 in a couple of years and well over 30,000 in 2024.

Switching to the question of the end of the bull market, I suspect end of the bull market it is near.  Wall Street Pundits suggest 6 to 18 months more of bull level.  I am splitting the difference and will make my changes in July 2019 (hoping to being early and willing to give up a little profit) or sooner if it becomes obvious the bull market has arrived (maybe the mid-term elections?).  Currently I have set aside 3 years of living expense in cash (money market funds).  About July 2019 I will raise additional cash by selling some winners (I bought Amazon at $800, now $2000) and harvest tax losses.  I will then take a vacation.  A typical bear market - a drop 20% or greater - is about 15 months long.  As I feel the end approaching (and I don't mind being a little early of late here) I hope to buy some growth stocks at bargain prices and quality dividend stocks at what would be temporarily high dividend payouts (5%-6%+).  I know -"The best-laid plans of mice and men . . . ."  But to my mind "plan" beats "no plan" every time.