What to Invest in when market is low?

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pacificredhawk
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What to Invest in when market is low?

Post by pacificredhawk »

Hi guys!

Quick question that may be a long answer.

I personally think the Dow & S&P are very overvalued compared to what the economic situation is.

What is a good sector to invest in the market or international market when you think that the market may loose a couple thousand points in the next couple years?
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pteam
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Re: What to Invest in when market is low?

Post by pteam »

If you think the market is going to lose thousands of points than probably bonds or even CDs. If you want to buy stocks that aren't hitting record highs look for sectors that have had slumps recently such as emerging markets.
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bengal22
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Re: What to Invest in when market is low?

Post by bengal22 »

not into market timing. just the fact that the talking heads say the stock market is at a high and the bonds are due for a crash and CD's don't pay are ammunition for us to pick an asset allocation that fits our needs and risk acceptance and stick with it.
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deikel
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Re: What to Invest in when market is low?

Post by deikel »

They are never overvalued, they are always priced exactly right at the day and time they were priced - today.

I assume you dont want to invest in a market that is at its max not knowing if it will drop tomorrow ? Why do you care what it does tomorrow, when all you want is take out money in 20,30 or 40 years ?

Aside from that, European stocks are lacking behind, healthcare is on the rise since 15 years running and no argument to drop any time soon (not worse than others anyway), small caps always give an extra premium and if you are really looking for a totally undervalued thing: gold and precious metals - check out VGPMX its the most undervalued thing I have ever seen.....well, maybe for a reason.....maybe not... :mrgreen:
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plats
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Re: What to Invest in when market is low?

Post by plats »

If you’re sure you could buy a short or ultra short ETF. SDS doubles the inverse return of the S&P. Its name also brings back old memories of my youth.
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nisiprius
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Re: What to Invest in when market is low?

Post by nisiprius »

Maybe twenty years ago, "tactical asset allocation funds" were all the rage. The theory behind these funds was that they had a "neutral" allocation, such as 60% stocks, 40% bonds, but instead of blindly holding to it, they would intelligently adjust up and down, cutting back on stocks when stocks were overvalued and vice versa. There were many of them. Vanguard had one, which boasted of using "quantitative models" to do the adjustments.

They were basically dismal failures; you hear very little about them. In 2012, Vanguard closed theirs, froze the allocation at 60/40, and merged into the Balanced Index fund. Larry Swedroe notes that 70% of tactical asset allocation funds underperformed plain old robot-mix Balanced Index.

Difficult as it is to believe, managers have been unable to add value through tactical asset allocation.

If the pros can't do it, I don't think I can. I just cross my fingers and stay the course.

Do you have any evidence that individual investors who adjust their investments based on their intuition that the S&P and Dow are "overvalued according to the economic situation" do better than investors who just blindly (or firmly) stay the course?
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Re: What to Invest in when market is low?

Post by z3r0c00l »

pacificredhawk wrote: I personally think the Dow & S&P are very overvalued compared to what the economic situation is.
All due respect, but you don't have any way of knowing this and you probably are not ready to invest in stocks at all. You may get lucky. The worst possible scenario is that you get lucky this time, and double down next time you get a hunch and lose far more. Like your entire retirement - many did during the last recession. Panic selling of 401Ks near market lows, etc. No shame in putting all your money in bonds and just working a bit harder/longer to save up enough.
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pacificredhawk
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Re: What to Invest in when market is low?

Post by pacificredhawk »

are vanguard value funds a good way to stay from overvalued stock?
deikel
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Re: What to Invest in when market is low?

Post by deikel »

pacificredhawk wrote:are vanguard value funds a good way to stay from overvalued stock?
they are as managed and hence as silly as any others....

Maybe you want to try the 'Dogs-of-the-DOW' method ? That method implies that you pick undervalued stocks each January of the year and you just follow some simple math to determine whats undervalued - or look up the table. Very simple, some swear on it
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Re: What to Invest in when market is low?

Post by FrugalInvestor »

"Don't just do something, stand there." -Jack Bogle
Have a plan, stay the course and simplify. Then ignore the noise!
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Re: What to Invest in when market is low?

Post by livesoft »

pacificredhawk wrote:What is a good sector to invest in the market or international market when you think that the market may loose a couple thousand points in the next couple years?
Why is the question in the title of the thread about investing when the market is low and the question in the first message is about investing when the market is high?

I will tell you what I do when the market is high: I invest in my taxable account because if the market drops, then I tax-loss harvest and get other taxpayers to pay me for my losses. The only problem that I've had with that is that the market goes up and I make tons of money.
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Daniel O
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Re: What to Invest in when market is low?

Post by Daniel O »

pacificredhawk wrote:are vanguard value funds a good way to stay from overvalued stock?
Yes. I recommend Vanguard International Value (VTRIX) for you.
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pacificredhawk
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Re: What to Invest in when market is low?

Post by pacificredhawk »

And regarding buy and hold. Im 29 and feel I can use some further risk as part of a well diversified portfolio. So there.
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Re: What to Invest in when market is low?

Post by Grt2bOutdoors »

pacificredhawk wrote:And regarding buy and hold. Im 29 and feel I can use some further risk as part of a well diversified portfolio. So there.
Are the monies to be invested in a tax-deferred retirement plan or a taxable account?
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Re: What to Invest in when market is low?

Post by Grt2bOutdoors »

pacificredhawk wrote:And regarding buy and hold. Im 29 and feel I can use some further risk as part of a well diversified portfolio. So there.
Buy emerging markets index VWO or the Emerging Markets Stock Index or VSS - All World Ex-US Small Cap Index. That is plenty risky on a standalone basis, as part of a much larger portfolio, consider it to be the spicer portion of it.
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Re: What to Invest in when market is low?

Post by nisiprius »

By the way, pacificredhawk, didn't you mean "What to invest in when market is high?"

Or (personally) I would change "is" to "seems," "What to invest in when market seems high?"

By the way, anyone can always change the title of a thread they've started--you just edit the initial post and change the "subject" line.
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The Wizard
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Re: What to Invest in when market is low?

Post by The Wizard »

Emerging Markets are low now.
Buy those...
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freddie
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Re: What to Invest in when market is low?

Post by freddie »

SPXU :) Yeah I know these funds are really only valid for a day but the point stands. If you think the market is going to lose a couple thousand points there are instruments out there where if your right you will get a nice return. If you don't have enough confidence in your predication to be shorting the market maybe you should reconsider premises.
pacificredhawk wrote:Hi guys!

Quick question that may be a long answer.

I personally think the Dow & S&P are very overvalued compared to what the economic situation is.

What is a good sector to invest in the market or international market when you think that the market may loose a couple thousand points in the next couple years?
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cheese_breath
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Re: What to Invest in when market is low?

Post by cheese_breath »

Determine your desired asset allocation and invest to meet it whether the market is high or low.
The surest way to know the future is when it becomes the past.
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fredflinstone
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Re: What to Invest in when market is low?

Post by fredflinstone »

pacificredhawk wrote:Hi guys!

Quick question that may be a long answer.

I personally think the Dow & S&P are very overvalued compared to what the economic situation is.

What is a good sector to invest in the market or international market when you think that the market may loose a couple thousand points in the next couple years?
This is not a smart way to approach the markets, but if you must do it then consider:
- bonds
- Japanese equities
- cash
- gold
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash (mainly CDs) 22 / TIPS 8
staythecourse
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Re: What to Invest in when market is low?

Post by staythecourse »

No offense to the OP, but a thread like this screams "pick up a book and start reading". For now I would leave your money in cash until you have read several books and then come up with a investment plan.

Suggestions:
Easy level: Jack Bogle's edition to the Little Book series and Allan Roth's "How a second grader beat wall street"
Intermediate: Rick Ferri's "All about asset allocation" and Dr. Bernstein "Intelligent asset allocator"
Difficult: Roger Gibson's "Asset Allocation"

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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bertilak
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Re: What to Invest in when market is low?

Post by bertilak »

pacificredhawk wrote:And regarding buy and hold. Im 29 and feel I can use some further risk as part of a well diversified portfolio. So there.
I think you have a point there. Make a few mistakes now (e.g. market timing) so you will be wiser in the years to come.

But, when people talk of risk, they generally mean market risk, not human screw-up risk. Market risk has a habit of paying off with higher returns, eventually and on the average. No guarantees there -- that''s why it's called risk.

Human screw-up risk does not have the advantage of expected higher returns. Quite the opposite. It generally lowers returns.
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lazyday
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Re: What to Invest in when market is low?

Post by lazyday »

fredflinstone wrote:, but if you must do it then consider:
- bonds
- Japanese equities
- cash
- gold
Why Japanese equity?

Early in the 2008 decline, Japan smallcap did fall less than other global. Do you think Japan might have low correlation in a future decline, or that it's cheap today?
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fredflinstone
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Re: What to Invest in when market is low?

Post by fredflinstone »

"Why Japanese equity?"

Japanese equities have been in a slump for (basically) nearly 25 years. If the OP wants to buy stocks that are out of favor and off their highs, he can't do much better than Japan.

On a serious note, the OP really needs to do some reading, think about his investment strategy in a more serious way, and dial back this idea that he knows when this or that market has peaked.
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash (mainly CDs) 22 / TIPS 8
lazyday
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Re: What to Invest in when market is low?

Post by lazyday »

Yes. While I do think markets are expensive today, and have lower expected return than historically, that doesn't mean we can usefully act on this.

Lots of good books are suggested on this site.
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