Now the question is the same as I asked people in 1999: how will you know when to get out of the market? If you can ride it to the top and then get out before it drops, you will have done better than I. (“I” is correct grammar here)
I would argue that a long-term diversified portfolio (though boring and not interesting from a blog-reading standpoint) is far better than trying to prognosticate.
I actually have had funds continuously in the market since about 1994. I did not get out in 1999 or 2000 or 2001, and have been putting retirement funds in at a level of 20-25% of my income since 2000. I donlt think that you need to get out at a top if you are diversified and have a long-time horizon. Having 20% in cash in 2000-2002 turned out to dampen the downdraft for me to about 15% of my portfolio by 2003. This was more than made up by the run we’ve had since 2003. As long as you do not put all your eggs in one hot basket and guess wrong (gold in 1981, cash in 1995, tech stocks in 1999, real estate in 2005) you will do fine.
Boring, but effective.
Disclaimer: I am not a broker, a shill for any financial services company or an aspiring financial advisor. I am a statistically informed, fiscally thrifty engineer.
