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Comment by datpuz | Hacker News Reader

I asked this in a similar thread a couple of weeks ago, but I feel like the sentiment is a lot more pessimistic today than it was then. Anyway, I've been holding way too much cash for the last two years in anticipation of a recession. Everyone was telling me that trying to time the market is a bad idea and that I should just invest and forget about it, but given the current signals, might it be a good idea for me to hold out just a little longer?

I'm really on the fence about it, I know I've lost a lot to opportunity cost and inflation and I regret holding out, but given recent news, it's hard for not to want to keep waiting... just a little longer...

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Whatever you feel comfortable with. To own stocks means to accept upside and downside risk. If you can't afford to lose 40% in a year because you might need the money within 10 years, reexamine your risk profile. It's okay to have cash on hand that you might need for a down payment, wedding, car purchase. If you're talking about money you won't touch in 10+ years and you won't panic sell, then don't try to time the market.

Timing the marking is a bad idea, but getting good value for your money is a good idea, and has some element of timing. Don't try to figure out when prices are low, figure out when value is high. For instance, relatively low P/E, high dividend yield, high ROI, high ROE, etc. If you're looking to invest in an index fund, check out the S&P 500 historical P/E: https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ea...

There's no shame in holding cash when value is low. People like Buffett are known for doing it. There are no called strikes in investing, so don't swing at mediocre pitches. But when value is high, you'd better swing for the fences, because that doesn't happen all that often.

Earnings are also cyclical, just like prices. Imagine an industry whose earnings are especially sensitive to business cycles. On an upswing of the cycle, they look like a good deal because their P/E might be low, but that's only because the market is reflecting the risk inherent in the industry. After earnings crash during a recession, investing in such a "value" company at the top starts to look like it was a bad idea.

Got some reading time? Keep your cash but offset with leveraged ETFs. See here for how it works and why warnings of "decay" are overstated:

https://www.gyroscopicinvesting.com/forum/viewtopic.php?f=10...

Example:

75% short term treasuries; 8.33% S&P 500 3x; 8.33% long term treasuries 3x; 8.33% gold 3x

E.g:

75% SCHO; 8.33% UPRO; 8.33% TMF; 8.33% UGLD

Rebalance quarterly. Steer clear from the advice in the thread to buy volatility (XIV).

Good luck.

Statistically, the only months with average declines in the stock market since 1950 have been August and September. If I were you I'd hold out 'till Oct. 1, and not a day longer. Two years and two months isn't that much worse than two years, and you'd really kick yourself if you turned out to be right after all.

Also, setting a fixed date will probably help you come to terms with it psychologically.

I'm sorry to hear that you missed out on the market growth over the past two years.

I am prepared to "lose" nearly 7 figures of net worth in the near future. But that's the "cost" I'm willing to incur so that I am able to stay in the markets for the long run.

This is not advice, but if I were 100% or even 50% in cash and had at least 20 years left of time horizon, with no immediate need for the cash, I'd probably put 5% back in the market each month until I had 100% allocation.

But... the US does feel heated up, so who knows?

What would you turn the cash into if you weren't holding it?

I guess just index funds

You're not alone, I did this as well.

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