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Originally Posted by gatorbill1
I moved to all cash and some short term bond funds recently. Scary right now and next year. I can't afford a big loss but I can live with very small gains.
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Everything in investing is "it depends." It depends a lot on time frame and expected disbursements versus reserves. Chances are that even a 40% decline in the S&P 500 - if it happens - would be reversed within 10 years. But if you don't have 10 years or need 50% or more of your nest egg to survive the next 5 years, then I'd be no more than 20% in equities. I'm 68 and believe I have a reasonable expectation of living a decent life 15 - 20 years from now. I have what I consider a neutral position for someone my age - about 50% in equities, spread among different indexed ETFs with diverse schemes and objectives and 50% in mostly low-risk short-duration income generating assets. I'm a longtime quantitative analyst. Historically, high multiples do not cause crashes but just measure potential susceptibility to a major correction. Lurking in the geopolitical landscape are many potential "global disasters" - my experience teaches me that these are best ignored when it comes to investing. The market is generally a function of economic productivity in 10-year increments but not necessarily year-by-year.
Do I see the seed of potential scenarios (Tariff wars, WWIII, massive unemployment of government workers in the name of deficit reduction) ? Sure, but betting against the US market is seldom profitable for 10-year periods and predicting the short-term is tough. Remember, for personal wealth, the effects of stock market volatility on your nest egg should never be measured by peak-to-trough which makes for jotting news headlines. And under no circumstances should you pull out when the market is down substantially. Chances are you will get all of it back if you wait long enough.
Predicting short-term movements is a fool's game. I'm neither very bullish or bearish right now, just neutral. My advice - stay the course.