Re-balance into Equities

masonic

valiant24 said:

masonic said:

 Meanwhile the rest of the world (barring India and a couple of other places) is looking much better value, as are some sectors of the US market. Make of that what you will.

What should I make of it?

That there are alternatives to trying to time the market if your objective is to avoid a dozen or so companies trading on the US stockmarket that are driving the high valuation. Making such decisions can leave you sitting out on continued market irrationality however.

poseidon1

valiant24 said:

There's no right answer to this, except in hindsight ...!

I took some profits ahead of the budget, and sold an equity managed fund that I'd had for many years, and had quintupled my investment.  (In fact, the CGT rise was not as high as expected, but it was still a good time).

So I am now sitting on a| sizeable pile of cash. In order to keep my 60% equities balance I should put a large sum (hundreds of thousands) back into equities.

I'm quite the disciple of Lars Kroijer etc, so it should be global trackers.  His ethos is that no-one knows anything, and you should never try to time the market, so by his rules I should bang the whole lot into VWRP or similar tomorrow.

But it just doesn't seem like a good time to do so, with the US market (almost 70% of most global trackers) close to all-time-high valuations.

I know that many here are experts on what other people should do ;-).   What should I do?

Thanks
V

This does not really help you since you are a long investor in equities.

In my case and with the hope for a quick short term profit up to xmas, I purchased an S&P 500 etf (VUAA) at end of September in the expectation that a Trump victory and a potential traditional santa rally for the index might net me  10% profit ( or thereabouts).

It is currently sits at a 10% gain today, inclusive of currency appreciation from sterling's decline so hoping this remains extant when i jump out at end December.

Can appreciate reticence to jump back in especially where your  tracker is heavily influenced by American stocks.

However what about IvanOpinion's suggestion of initial drip feeding back in? Although in your case that maybe a 5 figure number each month at higher and higher prices, but if there is some form of  correction sometime next year you could always try and 'balance the books' with a large compensating lump sum investment at that time.

Not quite the best of all worlds, but perhaps this allows you to participate in the markets ' continued exuberance, whilst keeping powder dry to benefit from any downturn. Must be frustrating sitting on the sidelines merely earning deposit  interest potentially taxable at higher rates whilst further gains are made by others.

OldScientist

valiant24 said:

There's no right answer to this, except in hindsight ...!

I took some profits ahead of the budget, and sold an equity managed fund that I'd had for many years, and had quintupled my investment.  (In fact, the CGT rise was not as high as expected, but it was still a good time).

So I am now sitting on a| sizeable pile of cash. In order to keep my 60% equities balance I should put a large sum (hundreds of thousands) back into equities.

I'm quite the disciple of Lars Kroijer etc, so it should be global trackers.  His ethos is that no-one knows anything, and you should never try to time the market, so by his rules I should bang the whole lot into VWRP or similar tomorrow.

But it just doesn't seem like a good time to do so, with the US market (almost 70% of most global trackers) close to all-time-high valuations.

I know that many here are experts on what other people should do ;-).   What should I do?

Thanks
V

You are completely right, you will not know what would have been the best decision until you've made it!

You have three(?) choices
1) Invest now (lump sum)
2) Drip feed (and choose a period over which to do it)
3) Wait (until when?)

Any of those choices could turn out to be wrong.

Between 1976 and 2022, lump sum investing has beaten drip feeding about 60% to 70% of the time (e.g., see https://www.vanguard.co.uk/professional/vanguard-365/financial-planning/financial-well-being/cost-averaging or similar at https://corporate.vanguard.com/content/dam/corp/research/pdf/cost_averaging_invest_now_or_temporarily_hold_your_cash.pdf)

InvesterJones

valiant24 said:

InvesterJones said:

 I'd still take a global core, and just add another fund to achieve the tilt - whether that's a global ex-US or a particular region/factor you think will do better). 

In what proportion?

That's your call to make depending on how strong your conviction is that the market is wrong about US equities or how sure you are another region/factor will do better.

Exodi

IvanOpinion said:

I remember reading somewhere that markets/indexes spend about a third of their time at all-time highs. Assuming you are looking at a long term investment (10+ years) then you should be fine. If you are concerned you could try drip-feeding the money in on a monthly basis, but historically that has given a lesser overall return.

I found a chart that illustrates what you say.

Plus people often say "I dunno, the market feels up, I don't think it's a good time to buy" but in practice I'm not so sure people would actually buy when the fated dip occurs.

I very well expect that should the papers read "RUSSIA DECLARES WAR ON THE U.S, COULD THIS BE THE END OF THE WORLD???" and markets start plummeting, that these people will not run to start flooding all their money into investments, but will again hold the view "I dunno, I don't think it's a good time to buy".

In any case, most people expected that Covid would decimate markets when they dipped in March 2020. A year later and the S&P500 had almost doubled. No-one knows where stocks will go next.

Ivkoto

Today's high is tomorrow's low!

thegentleway

It's psychologically difficult to invest large lump sum. I struggled as well as it takes years to earn those kinds of amounts. Investing in 3 payments over 3 months seemed to take the edge for me so would have been happy to do that. Then I saw that ~60% of the time you are better off just investing lump sum so I bit the bullet and did that instead. 

What should you do? Whatever gets you invested the fastest. If it's 12 payments over 12 months then so be it. Better that to sit on pile of cash for years on end deliberating when is the right time.

incus432

For someone has has hundreds of thousands invested I am surprised you have not faced this dilemma of timing before - most of us have often wondered if the market is too high and should we wait for a dip? Or alternatively is the market at the bottom or will it fall further? There's lots of wisdom in the suggestions and comments above, but noone knows - it's your call. 

Ivkoto

Another chart ⬇️ for digestion 

leosayer

I invested £32k in global equities in early 2007 just before the credit crunch.

I did feel a bit sick at the time but kept it invested and it's now worth over £100k.