Quote:
Originally Posted by brendoh
just put it in vanguard target retirement date with an stock/bond allocation you are comfortable with and continue to max it out. big picture thinking.
I feel like this can't be said too many times.
OP, the thing that most people don't realize when they say "the market is overvalued" is that the correction of overvaluation doesn't necessarily lead to lower prices. Let's say that there is some true "fundamental value" for the entire U.S. market right now, and that hypothetical market value is one that is expected to generate future returns that line up with historical equity returns.
Suppose that right now, the U.S. market is valued at 2 times that fundamental value. One possible outcome is that we experience a 50% drop in price. If that happens, of course you'd rather not be invested. But a very possible different outcome is that the market doesn't drop, but simply generates lower than historical returns for the next several years. So we might experience 4-6% average market returns for the next 5-10 years (rather than 8-10% per year) due to the current overvaluation, but stocks are currently priced lower than they are likely to be at any point in the future. In that case, I'm not sure you're happy to be sitting in cash.
My point is that "current overvaluation" isn't a sufficiently good reason to be out of the market. Invest in a Target fund either immediately or over the next few months. If you truly don't expect to need the money for many, many years, doing this and ignoring the volatility is almost certainly the best decision you can make.