Are you one of those people who always has an excuse to not invest. In 2008, as the market was falling, did you tell yourself you would wait until stocks looked better before investing. Then in 2009, were you waiting for it to drop just a bit more? Now, in 2014, is your latest excuse that the market is too high?
Sure, the S&P 500 is up more than 13% for the year, but is it the market? U.S. small companies, typically the best performing asset class, are up just a bit over 5% so far this year. What about the other half of the global economy outside the US? In aggregate, foreign stocks are down about 4% for the year.
So, is the market too high? Some parts may be; others are not. What will be hot tomorrow? How can you possibly know?
In 2008, did you start investing heavily in Norway where, in 2009, stocks rose 87% versus a mere 26% for U.S. stocks? In 2011 did you switch to stocks from Singapore, Germany, Denmark, and Belgium, whose markets did more than twice, as well as ours in 2012?
Yes, U.S. large-cap growth stocks might have done well recently, but they are not the stock market. Diversify globally, own the right mix of stocks and bonds for your risk tolerance, and rebalance regularly. Then you won’t need to worry about the market being too hot or too cold. Over time, it should end up just right.