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Hi all,
I am a new sunscriber. Would like to get your thoughts on the topic of increasing cash position vs. stay invested when the market is high. As we know, the current US market is fully / over-priced, Mr. Warren Buffett has been increasing Berkshire’s cash position and pausing major buying (in the US market). There are tendency to exit equity market (or reduce position). On the other hand, we often heard we should stay invested and not interrupt the compounding process of equities – there are cases that if investors stay the course, even if there is a crash, many of the good companies their stocks went back to yield very good returns . So how do we make sense on the current market, what might be the prudent approach? Would love to have your thoughts.
Thanks. -Daniel
Doesn’t it matter too what the time horizon may be for needing or using the investments and what they are to be used for?
I think that definitely matters in terms of whether the money should be in stocks in the first place. But that seems more a question of “should I pull this money from the market now because I’ll soon need it,” not “should I pull this money now because the market is overpriced.”
That affects the asset allocation.
“As we know, the current US market is fully / over-priced…”
I don’t know that.
“Mr. Warren Buffett has been increasing Berkshire’s cash position and pausing major buying…”
He’s doing that for a different reason than you or I should.
“There are tendency to exit equity market (or reduce position).”
Charlie Munger would say that he became rich because so many people made investing mistakes. This would be one such.
“On the other hand, we often heard we should stay invested and not interrupt the compounding process of equities…”
That is the ticket to amassing wealth.
“… what might be the prudent approach?”
The answers are above.
I think you have gotten some salient advice already so I will try not to repeat what has already been said.
I think trying to hoard cash because the market is overpriced and then deploying that cash when you think the opportunity is there is fool’s gold. You might have a moment or two, but over time the sheer anxiety of tryi