Like most of you, I am perplexed about what to do in the face of markets that continue to rise, but whose rise is very understandable (for the record: zero interest rates, zero or negative inflation, low oil, limited growth, and especially no investment alternatives, without accepting that PEs are still reasonable in historical terms even if above average).
For the investor like me who has a horizon of more than 10 years, there are really 2 options: sell now and miss the greatest rally in the history of the stock market (when Greenspan gave his speech in December 1996 on irrational exuberance, the stock market still rose significantly for 3 years until the bursting of the internet bubble in 2000) or stay in the market and prepare to suffer downs, ups and downs.
If one can have this perspective as I do, it would be more costly to withdraw from the financial markets now (assuming that my investments are correlated with the markets in general and that I do not have highly sensitive securities, of course) than to ride the waves.
In this sense, the stock market is like life: you can't avoid misfortunes and happiness only makes you more happy. Trying to work on avoiding misfortune leads to frustrations, working on the search for happiness, even with its downsides, is much more enriching.
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Excellent article Armand,
For my part, after several years of investing in the stock market, I know full well that it is not Mr. Market that I buy but rather a few carefully selected companies, and I always end up finding some regardless of the valuation of Mr. Market.
Good morning ,
Since we are talking about waves (maybe rogue ones, who knows) or even crashes,
Have any of you used the free ETF replay features to select and backtest since mid-2007 (at random,,,) a portfolio of 3 ETFs for example,,,??
In free features we have:
– ETF ranking by category & performance
– decorrelation of assets to reduce volatility, reduce drawdowns, shorten recovery times
– the backtest of the portfolio with the performance compared to the spy (eg): the CAGR compared; The volatility; The max draw down
There is also EZ backtest which allows you to simulate a progressive investment (always during a crash period)
I had a bit of fun at the time with etf replay. It's a shame, however, that you can't test portfolios of more than 5 positions for free and that there aren't more stocks, excluding ETFs.
And in the end, it remains backtesting… many swear by it, but it remains and will always remain past performance…
And yes, the future is not yet available in stores 😉 but what is not bad nevertheless is to see how 2 asset classes behave (e.g. stocks/bonds or sectors) held in certain proportions, in the event of a crash like 2008