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Comment by McBlorker | Hacker News Reader

I'm curious: is anyone at a point where they're pulling out of equities at all? I feel like things are getting a bit too good to be true in the markets.

The Shiller P/E ratio is at a 2nd-time high - the only other higher time being the dot-com boom and bust: multpl.com/shiller-pe/

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I became a 'bear' after Trump election (I think unrealistic expectations) but I have been very wrong so far - and I don't work professional in finance so only a sample of one example. I sold off most of my play money and pulled down risk of long term holdings.

Lots of opportunity lost. I just can't get over the feeling of repetitious omens. My family (commercial real estate clan) says when new large office building construction goes up it tends to signal end of bull run. Where I live we are voting on a large bond on the back of HUGE growth in home values, last time we did this was 2007...

Trying to time the market is a well known suboptimal strategy. Just leave your money and try not to worry about it.

My issue with this line of thought, is that while completely true, it also doesn't mean a whole lot. It is completely dependent on it being the US stock market. And during a period for that stock market that had a number of incredibly important items go it's way. Its not backfitting because it happened, but we only find it meaningful because we happened to have been here during it. For any number of reasons, including just how the universe works, that doesn't mean anything going forward.

> "It is completely dependent on it being the US stock market."

Not really. It's only dependent on stock prices inherently reflecting all of the information buyers and sellers have about their expectations, including expected risk and reward. Trying to "time" the market basically means trying to find a signal other buyers and sellers haven't figured out, or at least not enough of them to cause prices to shift accordingly.

Which isn't to say it's impossible. You can be among the first to notice something is awry. It just probably won't be "the P/E is off"; lots of people look at that. It'll be something like in the last housing bubble -- "huh, I noticed housing prices are way out of reach for median income earners, so I looked into loan practices, and apparently risky loans are being repackaged and sold off in a way that masks the risk" and then watching things like loan default rates like a hawk, and then selling as soon as loan defaults started affecting the market.

My point was that entire countries economies and political systems sometimes fail. That hasn't happened in the US in the same way as it's happened elsewhere. But if it had, then "timing" the market, by which I mean selling it, would not have been suboptimal.

Maybe I define market timing differently. Holding a healthy cash position for future investment and selling investments from time to time based on either their valuation or prospects, whatever that is called, is not a bad idea.

I contrast that with being 100% invested in index funds at all times, forever. That might backtest well, but that doesn't mean it will forward test at all well.

Indeed, it doesn’t even always backtest well. There are several 10 and 15 year periods where negative real growth occurred in stock market indices.

Sure, with a 30-year horizon, everything smooths. But entering a market at the wrong time has severe implications.

That said, it is far more probable that a reluctant investor misses growth opportunities by failing to invest than by investing at the wrong time.

Unless you’re retiring in the next five years or something like that.

There are inexpensive "target date" mutual funds that split between stocks and bonds, adjusting the mix towards bonds as the date approaches.

I think these are a decent choice for disinterested people.

Do you think market will return to this level with your current basket of equities? There is an argument that the market has too much liquidity due to QE and low rates within the fractional reserve system. If the market crashes, will the monetary policy be there to get the market to these highs within 5-10 years?

Also, if you think the market is going down, one doesn’t need perfect timing. You can get out and have cash on hand to buy later. If everything goes down 25% and you sold out 5% below the max value, you now have more money than your peers, which started in the market, to get gains in the future.

This is true, but nailing that timing is really hard. I can't remember the exact numbers but if you missed the 10 best days for the market in the last 40 years, you missed out on 70% of the gains.

If you're retiring in the next five years your exposure to equities should be lower regardless of what the market looks like.

You aren't going to have 100% of your retirement in equities if you're going to retire in five years.

3 months ago I made a shift of 1/3 of my retirement funds to cash. I took 90% of my taxable accounts to cash. It's a risk, of course, everything is, but the valuations of stocks and housing are as you note high. I normally hate holding cash, but I don't see anything I want to invest in. I'm sure that will change eventually.

I've been very nervous for the last several years and missed out on some big gains. Oh well. If I'd bought {whatever} back in the day, I'd be retired now. I suggest keeping some cash aside for a year or two of expenses. Otherwise, keep yourself exposed to the market.

Why would you. Everyone is so in the money already, who cares if you get a 10% down day when you're up 100% yoy? Put another way, everyone is playing with the houses money so why not risk it?

Alright. It's past my bedtime. I'm folding. Anyone want to buy my shares? :-)

By pulling out do you mean liquidate existing holdings, stop increasing holdings, or something else?

If you follow a simple rebalancing strategy, you'll automatically sell stocks when they are more expensive and buy them when they are cheaper.

This. I rebalance my portfolio to hold the "correct for me" allocation.

I did. Lost 15% of possible gains. Back in for a bit. Have my inverse ETF ready for the crash. Until then XLK and the oil ETNs.

I'm not, but then again, the vast majority of my wealth at retirement is in paychecks I haven't earned yet. Even at 100% equity, I'd be happy to see a market correction. Like, people who started investing in stocks in 2009 are doing really well.

This is the key! Even when the economy was going into the crapper in 2008, I left my money in (just rebalancing annually). I lost 30% of my money at the bottom.

However, in the last decade or so, I made it all back plus another 60%. If I had pulled out I'm pretty sure I would have missed a lot of those gains.

Potentially melt up before melt down.

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