Super-inflated market. What to do?

On September 25, 2019, from Bruce W……DDS, ON, Canada

Question:

Talk about this red hot market being at its peak [maybe] and we’re long overdue for a major correction. Do you still invest in ETF’s with prices being so over-bloated?

Monday Morning Millionaire Program Answer:

Thank you for your question, Dr. W. Many have similar concerns.

At market tops, and we might well be near one, as well as at market bottoms, and at all times, it is important to maintain our personal asset allocation.

It is also important to invest in an ETF which mirrors the S&P 500 which itself is an excellent proxy for the entire US economy, the strongest in history. That economy, like all others, will go up and down and take the S&P 500 with it as well as the ETFs that parallel it.

Everyone feels good getting a bargain be it when buying a car or a house or a dining room table or anything else. When the market corrects and becomes a bargain, incompetent investors flee. Competent investors buy the bargains. A bottomed out market will rise with time and allow competent investors to take profits.

This approach does not apply to individual stocks some of which might never rise from their bottoms. (Penn Central Railroad, Enron, Nortel, WorldCom, most penny stocks are examples.)

To summarize:

  1. Have and maintain a solid, personal asset allocation position.
  2. Invest in an ETF which parallels the S&P 500.
  3. Maintain a long term view. (Habit number four)

The answer to yesterday’s question is similar to this one in many ways.

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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