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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: MrGreenJeans who wrote (2547)12/21/1998 9:33:00 PM
From: Investor2  Read Replies (2) of 15132
 
RE: "Why would one want to be 100% fully invested in this market when we are at 95.33% of possibly the upper range the S and P will see in 1999? ... I am currently 70% in equities-30% in cash and bonds."

Each of us must answer that question based on individual circumstances. Several possible answers (not necessarily MY answer, mind you) include:

1. There is no other compelling investment vehicle. Why choose to accept 4 to 5% in a money market? The return from your example would be 4.67% capital gains plus 1.7% dividends = 6.4%.

2. I don't want to sell and pay 20%+ of the profits to the government as capital gains tax? So what if the market moves sideways for a while? If I don't need the money now, why should I pay the tax now?

3. Interest rates are falling and inflation is just about dead. Historically, the market has performed well in periods of falling interest rates and low inflation.

4. The earnings could surprise on the upside. This could result in a higher price for a given P/E. It could also cause P/E multiple expansion.

Contrary to popular opinion, I think that an asset allocation of 70% equities:30% fixed is somewhat aggressive. If you feel uncomfortable, move to a lower equity percentage.

Best wishes,

I2
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