So without actually checking the numbers, wouldn't this have had you buy nothing but utilities since like 2011?
In terms of the whole market, there was a 1 yr period from 3rd qtr 2008 to 3rd qtr 2009 that would have been a total market buying period according to the buffett indicator. This would have been an incredibly rewarding period to buy an index fund like VTI. Ideally, I would have averaged in during that period and simply held until about now. Right now, the buffett indicator is saying sell in terms of the whole market. It may go higher, even much higher, but its dangerous territory from a historical perspective. The only sector I have the stomach to buy right now is energy because it is so utterly beat up.
Outside of that 1 year period, I would have been buying ETFs of the most beat up sectors. If there is no beat up sectors, I wouldn't buy anything at all. Just sit on cash until another undervalued sector shows itself or the market as a whole becomes undervalued. Sometimes you have to be patient for a while.
Well that was my point. I 2013 alone the market went up by 30%+, but you would (probably) have been sitting on cash, and same every year since. Maybe you'd put some into some dead money utilities and made ~2%. That's an expensive strategy! Like you many have been crying that the market it overvalued, a crash is coming since about 2011. As they have been sitting on their cash they've missed out on 50% gains. Basically a repeat of late 90s. That ended in a crash, but jumping out in 1996 would only have made it worse.
"In the 1990s, every dip in the stock market was hailed as a "buying opportunity," because the prevailing wisdom was that stocks always do well over the long haul.
And stocks usually do do well over the long haul, especially relative to bonds and cash. But there's one major exception to this: Stocks don't do well over the long haul when they're bought at extremely high prices.
When have we had extremely high prices for stocks?
Well, in the late 1920s, for example, just before the Great Crash and Great Depression. Stocks crashed nearly 80% and then moved sideways for more than two decades. Note that it also took 18 years to recover from the malaise market of 1966-1982.
We also saw extremely high prices in Japan in the late 1980s. Stocks crashed there and are still falling nearly three decades later.
We had extremely high prices in the US in the late 1990s.
During all of those peak periods, stocks hit extreme prices relative to earnings. And in all of those periods so far, the "long run" required to do well if you bought stocks near the peak has been shockingly long." -
http://www.businessinsider.com/stocks-for-the-long-run-dow-japan-2012-6This is another one of those "near-peak" periods in my opinion and at least according to some measures. So yeah, looking at it right now, I missed some big gains from not buying in over-valued market that got even more over-valued. But if reversion to the mean happens, those gains will be erased. You would have had a 0% inflation adjusted return if you bought in 2000 and held to now. 15 years! Don't buy during over-valued times. Markets can be high and go much higher for long periods of time. No one can really call it. I just don't want to be a buyer during these periods as they have proven to give very low returns over the long term. Whatever I have in the market stays in the market, but I can't stomach putting new money in during over-valued periods.