I agree the odds are against you if you start investing right now. But still, analysis has shown that the only way to get long term returns that match the long term averages is to stay invested regardless of what the market is doing short term. I think this is because of another fact revealed by modern analysis: All of the investment gains that push up an average return, are earned in those few days of extraordinary market increases. All the other market numbers year in and year out, are just random noise that can be ignored. So - if you're not in the market on those extraordinary days you're not going to keep up with the long term S&P or whatever other index you like.
But yes, maybe with the market so high then real estate or some other alternative less linked to the economy, might be a better choice. If you have the analytical skill to identify the better alternative.
From my early days: Nice lady at Fidelity said why do you have this one account with so much cash when the market is rising? I replied that's what's left of my first significant investment in Fidelity Magellan back when Peter Lynch was a celebrity for beating the market year after year. That's the remaining half of what I put into Magellan. "Oh."
I didn't tell her this Fidelity account was my after-tax account while my long term investing was elsewhere in a Deferred Compensation (IRA) plan that I was locked into with my employer. Previously I had accepted a Fidelity offer to assign a Personal Investment Advisor and then learned when we met him that he wouldn't even look at that other half of my savings in the employer plan. We thanked him and walked out, that wasn't retirement planning advice at all!
The two key words are, "stay invested." The people who get burned in a downturn are the ones who sell low. Sometimes that is unavoidable. People lose their jobs and can't make mortgage payments or foot the bill for repairs. A lot of people tapped their 401k for living expenses. Anyone who could hold the course in 2008 did just fine. It only took the market about 3 years to make them well, and within 5 years they had averaged a decent return.
Say you have an income of $60k, and a $30k emergency cash fund. If the market crashes and your job still looks secure, hold your breath take the dive with your emergency fund. At worst, you will probably get your $30k back. On the upside, that $30k may be $100k within 5 years, and another 50% crash would still leave you $20k to the good.
Now let's invest that same $30k today. If the market drops 50%, your $30k becomes $15k, and having to tap it for emergency expenses wipes it out. If you let it ride, that same 150% return over the next 5 years pumps it to a whopping $22.5k. You are still $7.5k in the hole. Over a decade you will make your money back, but your average rate of return will be pathetic. You would have been better to just sit on your money for 5 years and wait for an opportunity. As Warren Buffett has advised, "Don't get greedy."
Some investments will do better than others, which is why
DIVERSIFY is always a good idea. Bonds right now are a horrible investment, and guaranteed to lose money unless you hold them to maturity. Value stocks with a good dividend return are a good way to build equity. If you get into a DRIP, the dividends will go into additional shares with no broker or management fees, and during a downturn you are getting those shares at a substantial discount. Nobody is going to try to sell you a DRIP because nobody's palm is getting greased, but if you have ten or twenty years to go, you could do worse. Meanwhile, you can buy a share a month, or whatever, directly from the company with no fees. Diversify that one too, with at least three different companies.
I'm sticking with stocks right now (stay the course), but have diversified into offshore funds that are not dollar denominated. Metals are low right now, so are a good ultra-conservative place to stash some cash. just don't expect great returns in the long run. If you are looking for someplace to put funds until equities melt down, gold and silver are good, platinum and palladium are likely to fade because EVs don't need catalytic converters.
How you balance your portfolio is up to you, but you really need one. Holding enough cash to take advantage of a downturn can be profitable. Everybody needs that 6 month emergency fund, because having to bail in bad times will kill you.
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