Investing when the market is expensive
Discussion
I thought this was a very good piece from Monevator and addresses quite a few of the concerns expressed across various threads.
Investing when the market is expensive
Investing when the market is expensive
Panamax said:
"Personally, if I owned the global stock market with around 70% in US equities, heavily weighted towards tech stocks I d be feeling really jittery."
I've been saying this about passive investment for years but everyone else seems seems to plough on regardless.
And I bet everyone else is happy they ploughed on regardless I've been saying this about passive investment for years but everyone else seems seems to plough on regardless.
I find I'm faced with three options:
a) I sell out now and have sleepless nights whether I can buy back on the dip before it rises again. I find I missed it and now it's gone back up more than I sold at and I kick myself;
b) I tell myself NO! Leave it alone just like they say in the book. I watch it drop, stay calm, it drops more, stay calm, it drops more, panic and sell at the low point then regret it when it rises back up and buy back at a higher price and kick myself;
c) I'm going to try this version. Just leave it alone since I don't need the funds right now. When it crashes just hope it goes back up before I need the funds which won't be for a few years.
a) I sell out now and have sleepless nights whether I can buy back on the dip before it rises again. I find I missed it and now it's gone back up more than I sold at and I kick myself;
b) I tell myself NO! Leave it alone just like they say in the book. I watch it drop, stay calm, it drops more, stay calm, it drops more, panic and sell at the low point then regret it when it rises back up and buy back at a higher price and kick myself;
c) I'm going to try this version. Just leave it alone since I don't need the funds right now. When it crashes just hope it goes back up before I need the funds which won't be for a few years.
Phooey said:
And I bet everyone else is happy they ploughed on regardless
The point is not that the index has done well; the point is that most people owning the index don't have a clue what it is they actually own. They probably think they're well diversified when they absolutely are not.That's the thing in this country as a whole we're generally not well versed in finance;
It's way too common to talk to someone who doesn't know who their pension is with "it's my company scheme", has zero clue what it's invested in, or has some form of a tracker/etf without knowing what the weightings are.
Seems compared to counterparts i know in the US we're way behind in investing/saving terms.
It's way too common to talk to someone who doesn't know who their pension is with "it's my company scheme", has zero clue what it's invested in, or has some form of a tracker/etf without knowing what the weightings are.
Seems compared to counterparts i know in the US we're way behind in investing/saving terms.
Panamax said:
The point is not that the index has done well; the point is that most people owning the index don't have a clue what it is they actually own. They probably think they're well diversified when they absolutely are not.
Said on another thread I made a deliberate choice a few months ago that "good enough" would be good enough for a while.I'm nowhere near market cap or global weightings right now and I'm fine with that for a period.
Panamax said:
The point is not that the index has done well; the point is that most people owning the index don't have a clue what it is they actually own. They probably think they're well diversified when they absolutely are not.
Yeah, probably. I know what's in it but tend not to overthink it. It's just a tin of beans.Panamax said:
The point is not that the index has done well; the point is that most people owning the index don't have a clue what it is they actually own. They probably think they're well diversified when they absolutely are not.
It's something I've been considering for a while. I've done very well recently, but I don't think a world tracker is diversified right now. All IMO of course. Plus it helps I don't need to chase ultimate returns.Whilst typically you can just adjust your proportion of equities vs bonds/cash to suit risk, this is a new added dimension.
As it happens on Friday morning I sold a very large proportion of world tracker to invest without the tech element and possibly less US exposure. We'll see what happens next week. Thanks Donald
Panamax said:
Phooey said:
And I bet everyone else is happy they ploughed on regardless
The point is not that the index has done well; the point is that most people owning the index don't have a clue what it is they actually own. They probably think they're well diversified when they absolutely are not.I see that Tesla's P/E ratio is now about 240.
The shareholders' opinion must therefore be, that future profits will be increasing at a phenomenal rate.
I have read before that shareholders say, "Ah, but don't measure the Tesla business as a car manufacturer. The whole world will be buying their human man servants, running around in Tesla robotaxis and powering their homes and businesses using Tesla battery systems.
Perhaps that will happen, but if solely a car manufacturer, the Chinese will be providing very tough competition.
Everyones circumstances are different, investment horizons are different and risk perception is different. I'm 34, so happy to continue to plow into global trackers, as there will be plenty of time for market recovery when I want to access funds in 20 years time. Infact I kind of want a crash, at which point I will increase how aggressively I invest.
If I was pushing 60 then my appetite for risk may well be reduced.
There are not really any right or wrong answers, we all thought the markets were going to crash post COVID, yet you wouldn't want to have been divested over the past 4 years!
If I was pushing 60 then my appetite for risk may well be reduced.
There are not really any right or wrong answers, we all thought the markets were going to crash post COVID, yet you wouldn't want to have been divested over the past 4 years!
Panamax said:
The point is not that the index has done well; the point is that most people owning the index don't have a clue what it is they actually own. They probably think they're well diversified when they absolutely are not.
That s why people buy the index, then they don t need to care what did well, if it s different companies that do well in the future they ll own them too..?The diversification thing is deeper than just owning Nvidia. Tens or even hundreds of other stocks in the s&p500 will be hugely invested into Nvidia/amazon/microsoft - while valuations may be high, these companies are making huge cash from the investment in their products. The diversification for me is just how much of the globe relies on those companies to do business. They are business critical for many of the worlds largest companies. That’s quite diversified.
Personally I think Meta is the only one of the companies in those 7 that adds zero actual value, it s just an ad business with no actual product - the others are part of the fabric of humans lives and most large businesses.
okgo said:
The diversification thing is deeper than just owning Nvidia. Tens or even hundreds of other stocks in the s&p500 will be hugely invested into Nvidia/amazon/microsoft - while valuations may be high, these companies are making huge cash from the investment in their products. The diversification for me is just how much of the globe relies on those companies to do business. They are business critical for many of the worlds largest companies. That s quite diversified.
Wouldn't proper diversification mean investing in companies that don't rely on the Magnificent 7?Simpo Two said:
Wouldn't proper diversification mean investing in companies that don't rely on the Magnificent 7?
There aren't many. Anyway, my point was that beyond the ai hype - those big 7 are very successful businesses with often many revenue streams across multiple sectors, even if AI goes to pot, those companies will still print money.
It'll be behind a paywall but earlier today - "Stock Bubble Dread Grips Central Bankers In Washington".
https://www.bloomberg.com/news/articles/2025-10-11...
It essentially makes the point that valuations today are broadly the same as just before the dot.com crash of 25 years ago.
https://www.bloomberg.com/news/articles/2025-10-11...
It essentially makes the point that valuations today are broadly the same as just before the dot.com crash of 25 years ago.
okgo said:
Anyway, my point was that beyond the ai hype - those big 7 are very successful businesses with often many revenue streams across multiple sectors, even if AI goes to pot, those companies will still print money.
Chat GPT was released late 2022. The Nasdaq has essentially doubled since then. What I wonder is how much of that is growth in those revenue steams vs anticipated AI returns?Gassing Station | Finance | Top of Page | What's New | My Stuff