UK asset allocation

InvesterJones

Albermarle said:

InvesterJones said:

michael1234 said:

InvesterJones said:

michael1234 said:

Quite a few of the "global" funds I've looked at are 70% invested in the US.

Also, with so much pension money going into the stock markets, does it make those markets overvalued and if so how to gain from that knowledge?

No, it makes them fair value as considered by the total of investments going on (since they are market cap weighted I presume). If you think the rest of the world is overvaluing them, then sure, you simply sell more of them and buy something else, and in time you'll be proved right or wrong by performing better or worse than such funds.

But if you sell one stock and buy another, the net amount of cash invested in those markets remains the same. Ultimately valuation comes down to personal attitude. But lets take an extreme example, imagine all the stocks in all markets in the world were being sold at 10x what they actually are. i.e. in some sense they are 10x overvalued. In that extreme case, so long as they don't crash, I don't see how you would profit out of it ?

I think I understand, so a question of price compared to expected return? The market will price at what investors consider the right level for the expected return and risk (which as illustrated above, doesn't necessarily correspond to fundamentals, but instead the value of something to someone else), but if you feel differently then you can likewise sell to those investors and use your capital to invest in something else that you think will return better e.g. bonds, property, commodities, cash, whatever. Again, the market will have priced those at what it thinks is the right level compared to stocks (usually adjusted for risk - i.e. the safer something is, the lower the return) but if you think you know better than the market, you can take advantage by selling what's overvalued and buying what's undervalued.

The problem here is that 'the market' is effectively large numbers of very clever people who are constantly looking at and researching the market. Also if any new news should arrive they can react almost instantaneously.
So is it likely that you ( or me ) could discover that a stock was undervalued or overvalued, and that all these clever people have not noticed ?
I suppose it is possible, but I would not bet on it .

Nor would I, but if the OP thinks otherwise then they are free to try!