First off, I think for things like IRA and 401k, you should definitely invest as much as you can, because you can only invest so much per year. If you sit out this year it's not like you can invest 2x next year. Also, theoretically you aren't going to be pulling that money out for a while, so any hit you take in the next year or two will be made up (and then some) by the time you need the funds.
Aside from that, your attitude was mine last year--I had built up a pretty large cash reserve (not just b/c of investment nerves, I was also finishing grad school and wasn't certain what my future job prospects would be, so I felt it was prudent to keep a large amount in the checking/savings account), and wasn't sure what the hell to do with it, it seemed like everything was "overpriced". Ultimately, my reason for having a large cash reserve (looming unemployment) got itself out of the way and I decided yeah, it was time to start accelerating my investments in accordance with my new salary, etc.
Here's what I do: I use a sort of combo of dollar cost and value averaging. I have a set amount that I "can" invest each month (let's call it 1k). I have a desired growth rate for my investments (let's say 1% per month). So, on average, I want my fund to go up by: (end value at the previous month+$1k) * 1.01%. At the end of the month, I evaluate whether I am above or below that target. If I am below, I invest my "base" amount ($1k), plus enough to make up the difference between expected and actual values. If I am above (as I am right now), I invest $1k MINUS the amount that my actual value was over. This way, you automatically invest a little less when the market is high/skyrocketing, and then invest a little more when things are low. If you have multiple funds/stocks you are investing in, this approach will also tend to rebalance your allocation automatically over time. I read several papers that concluded value averaging gave slightly better returns and slightly better protection against losses, and my own personal analysis seemed to point in the same direction. It does require a little more active attention than plain old DCA, but it's basically a few minutes extra each month...not a big deal if I can get even a slightly better return!
At the moment, the market is going up way to fast, so I am putting in a little less than I absolutely can each month. However, at some point, the market will at least slow down/flat line for a while (or maybe even crash), and then I'll be able to pump in more money from savings.