My last post noted how investing during a stock market trough is a wise decision. Many financial advisers will never advise their clients to reduce exposure to the stock market, but given the current price valuations I suggest selling off some stocks to hold gold, silver, or practical real estate. The reason for this is clear – the stock market has had a great ride, but that ride is based on a handicap of low interest rates and valuations which exceed standard price/earning ratios of the past. Amazon has a P/E ratio of 300, Tesla has a P/E ratio of nothing because they don’t even turn a profit! Apple holds a pretty low P/E ratio of around 11 because of doubts on future profitability.
The point is, there is a frothiness to the US stock market which is alarming. In my opinion it would be best to sell of around 30% of your portfolio now and ensure your investments are in stable asset classes. I’ve mentioned investing in water almost almost one year ago, and here are the results (using 1 year return from today):
GE : up 22% (Current price $32.21)
ECL : up 6% ($119.10)
AWK: up 62.95% ($82.76)
WTS: up 21.47% ($61.05)
I would keep these water stocks except for ECL and sell high risk assets such as Tesla, Amazon, etc. to ride out the upcoming correction.
If you check out my post on how investing in the stock market is like a chess game you should note that my recommendation on gold/silver stocks has also paid off.
The particular company I linked in that post has gone up 151% and is now trading at 6.05. I suggest selling this stock at this time to retain the profits.
So in summary my suggestion:
Hold on to the water stocks
Cash out and perhaps put money into modest real estate