- Seeing the risk/reward equation for what it is and then appropriately positioning is not “timing the market.” It’s called “investing.” — Jesse Felder
Rebalance our entire Portfolio as follows:
| Shiller PE Range: | Stocks in Portfolio % | Expected 10 Year Return | |
| 10 Year PE Ratio > 30 | Low Limit: | 25.00% | 3.00% |
| 10 Year PE Ratio < 30 | Up to: | 30.00% | 3.33% |
| 10 Year PE Ratio < 27.5 | Up to: | 35.00% | 3.64% |
| 10 Year PE Ratio < 25 | Up to: | 40.00% | 4.00% |
| 10 Year PE Ratio < 22.5 | Up to: | 45.00% | 4.44% |
| 10 Year PE Ratio < 20 | Up to: | 50.00% | 5.00% |
| 10 Year PE Ratio < 17.5 | Up to: | 55.00% | 5.71% |
| 10 Year PE Ratio < 15 | High Limit: | 60.00% | 6.67% |
Use other Fundamental metrics as well as Technical Indicators to help decide when to rebalance.
Results For S&P 500 From Different Starting Shiller P/Es 1927‐2013:
We avoid buying expensive vehicles such as SPX puts, VIX calls, or Bear Mutual Funds to insure the risky parts of our portfolio – they are too expensive, and require the ability to time the market. Instead, it is far more efficient to simply substitute riskless assets for risky ones when the market presents the most risk (i.e. when it is the most expensive). Some trends last several months and others several years, but eventually they all end. This is not an opinion. It is a fact. The goal of investing is to keep your profits when the inevitable correction comes.
Remember, there is only one intelligent way to invest: figure out what something’s worth and then see if you can buy it less. This is true for Real Estate, Stocks, Bonds, Farm Land, etc…. So our overall investment strategy must have a component that rebalances into undervalued assets – to be successful in the long run.
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