Alright so I'm 30 years old. I'm sitting on cash to invest for the long haul. It's decision time.
Here is what I have learned from my research over the last few months:
- Proper asset allocation combined with annual rebalancing is the best long-term low-effort investing strategy
- Low-cost index funds (Vanguard) are the best way to own an asset class as they give broad diversification with minimal fees
Below is my working asset allocation based on my research. I want my money to work hard for me and I have a 5 out of 5 risk tolerance. Would love comments on this mix:
- 20% US Stocks (VTSAX) (-5% from all-time high)
- 20% International Stocks (VWILX) (-27% from all-time high)
- 10% Emerging Market Stocks (VEMAX) (-25% from all-time high)
- 20% REITs (VGSLX) (at all-time high right now)
- 15% US Long Term Treasuries (VUSUX) (-1% from all-time high)
- 15% US Treasury Inflation-Protected Securities (VAIPX) (-11% from all-time high)
So basically, I'm at the point where I need to lock in which asset allocation mix I want and then deploy my cash. My problem is that most of the asset classes listed above are basically near their all-time highs. I have a feeling that investing near all-time highs is a terrible idea. It'd be fine if I was investing money every paycheck over the next 30 years, but I am trying to deploy a lot of cash at once. This leaves me only comfortable deploying into international stocks, long-term treasuries, and maybe TIPS.
Should I wait for these asset classes to be more like 30-50% away from their all-time high before investing?
Is it fine for me to be just sitting in cash for a long time and wait for these asset classes to become distressed before deploying? Is there anything better than sitting in 1% APY online savings accounts? It looks like the average inflation rate is 3% for the United States, so the longer I sit in US dollars I just get eaten by the monetary and credit supply outgrowing me.