The hardest investment
One year ago, Rocky was diligently “dollar cost averaging” in stocks, corporate bonds and other “risky” assets.
It was painful at the time, yet his models, reason and experience suggested an extremely high probability of double-digit returns over the ensuing five years. (Rocky neither predicted nor expected a 70% rally in only twelve months.)
After this historic rally, Rocky’s estimate for stock market returns over the next five years is back towards the low single digits. What’s Rocky doing? He’s not betting that the stock market will decline, but instead, he’s pruning back some exposure (with long term capital gains tax treatment) and building his cash balances. The most difficult investment today: cash yielding zero.
Rocky’s a terrible market predictor and he readily acknowledges that the stock market could easily rise another 10% over the next six months. However, Rocky notes that the most difficult investment is often the best investment. And that painful investment is now “cash.”
[Disclosure: Rocky doesn’t provides investment advice. He always buys early, sells early, and goes to bed early.]