What to do when Valuations are High

What to do when Valuations are High? When you think the market is overheating David Merkel says you should consider four things (this is from a US perspective, but still relevant for Australian investors) 1) Increase your cash levels Cash is presently 16% of my portfolio. I let that fluctuate between 0-20%. I try to be fully invested during crises, and build up some cash when valuations are extended. 2) Invest more offshore Around 40% of the portfolio is in foreign companies, which are at present undervalued relative to similar US companies. 3) Emphasize companies with strong balance sheets, in industries that will not go away. 4) Buy cheap stocks. The median valuation of the stocks that I own is around 10x earnings, and 1x Net Worth (Book Value). Read more from the Alephblog here. (VIEW LINK)


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