I'm a little bit older than most on here, in my young 40s. Started investing late after a misspent youth. Have about 200k between 401k and Roth IRA.
Never attempted to time the market before, but considering changing my allocations from 100% Vanguard target date funds to 100% cash equivalent until market bottoms out at something like 10 times forward earnings.
Is this crazy? I feel like there's no way the market doesn't test the bottom again even under the most optimistic projections for the virus.
TC 225k
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1) I think market may go down but it may not go down to the lows we saw in March. 10 PE is probably unlikely
2) There are fundamentally very good companies that will emerge much stronger once the economy is back - especially once that has lot of cash in their balance sheets
3) Good ones that I think will go back to previous highs very fast and have very low risk include :
1) Credit card companies - Visa and MasterCard. These companies have insane margins and have a business model that is relatively safe. These should easily be back to previous valuations in 6-9 months
2) Large banks and brokerages - Most US centric financial institutions are well capitalized
3) The ones that will take significant time to get back are travel, retail companies and though they have large risk reward, many will go bankrupt
4) Some small caps are trading over cash or are at extremely low valuations - these will probably go back 3-4x if they survive.
It may be good to buy about 5% of your total expected investment every day for the next 2 months. If the market goes down, you will get more value, if it goes you will not miss the bus
Buy all the way down to the bottom and all the way back up the other side.