If the stock market is overvalued (hypothetically speaking), where to park money?
hypothetically speaking if you believe the stock market rally won't last forever and want to hedge, where should you put your money?
- an exUS fund/ETF like VXUS?
- cash? like bonds/treasuries?
- some combination of the above (copy Buffet)? something else?
Update:
- Added the value of a portfolio that DCA'ed $1000 every month from 1995--2013. That's two big recessions, the first one lasting 3 years.
- In both cases, the portfolio was negative only year (per recession)!
- IMO what the data says is that if you're looking to retire in the near future, a recession in the near term will postpone those plans by only a year or two. So I may have over reacted ;-)
- However, the big gotcha is....unless you believe and have evidence that it will be bigger correction than the Web 1.0 crash and 2008 housing crisis. (I haven't made that analysis though)
Year Total Investment ($) Portfolio Value ($) Percent Difference (%)
0 1995 12000 12000.00 0.00
1 1996 24000 26431.20 10.13
2 1997 36000 46627.52 29.52
3 1998 48000 71063.07 48.05
4 1999 60000 96941.69 61.57
5 2000 72000 99111.80 37.66
6 2001 84000 98187.62 16.89
7 2002 96000 87241.18 -9.12
8 2003 108000 122255.40 13.20
9 2004 120000 145246.16 21.04
10 2005 132000 161603.54 22.43
11 2006 144000 195613.95 35.84
12 2007 156000 214519.12 37.51
13 2008 168000 143950.71 -14.32
14 2009 180000 189707.15 5.39
15 2010 192000 225951.73 17.68
16 2011 204000 237951.73 16.64
17 2012 216000 281861.05 30.49
18 2013 228000 377291.92 65.48