The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: pka222 on November 05, 2013, 12:26:06 PM
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I ask this question because looking long term there must be some danger signals that are clear to those with the wherewithal to take notice, to me, not acting seem like setting your self up for a more wide ride than necessary.
Is there any P/E or related metric level at which you would change your asset allocation?
Lets say, like some of you, a mustachian is looking at a 40 year investing career. Given this - this mustachian is 100% long on stocks- say VSTAX - would it make sense to have some thresholds at which to move to bonds, cash, or other asset classes based on market performance?
For example, an trigger at a P/E of 30- move to 50% cash, a trigger of P/E 20- back to 100% stocks?
cheers
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I would recommend just keeping a balanced portfolio from the get-go, as this minimizes your risk as much as possible (trade off is you may not be rewarded as much). What you are proposing is effectively timing the market with a series of clear-cut rules. Trying to time the market tends not to work well.
I don't follow the typical forum aggressive-style of mustachianism and keep to a rule of 1/3 in stocks 1/3 in real estate and 1/3 in cash, as it tends to work well for my particular situation.
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Nope. When you're investing in a long time frame you're doing it for 40+ years. I don't care about any immediate metric when my time frame is that long. In fact that's the whole basis of long term investing, you don't worry about the dips and peaks and how they affect your investments.
(Insert your metric here) goes up? Invest. (Insert your metric here) goes down? Invest. Stick with your asset allocation that let's you sleep at night and move on with your life.
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The data suggests market timing, all forms of it, are ineffective.