The prudent sees danger and hides himself, but the simple go on and suffer for it. – Proverbs 22:3
This proverb comes to mind as my team and I evaluate investment opportunities in this market.
This is an expensive time to invest in stocks. The stock market is trading at 20x earnings and the Nasdaq even higher at 30x earnings. Chasing overpriced assets can lead to painful consequences long-term.
There are always deals if you look hard enough – we continue to explore options overseas or value stocks. But it’s hard to find opportunities we really like. In general, everything seems expensive. We see some danger here, so we’re reducing our risk.
So what to do? Private debt is one option. It’s good to be on top of the capital structure lending against solid assets and business management.
Money markets funds and bonds are good stable shelters right now. Money markets are earning around 5.25% and bonds 6% – both less than expected 10% return on stocks, but both are also significantly safer and much less volatile.
Consumer prices continue to rise and the Fed might increase rates a bit more. Money market accounts and bonds are solid strategies to preserve and grow wealth as the economy remains a bit shaky and people are worried about the future.
So be patient. This is a good time to exercise caution, be circumspect, find balance, and reduce speculative assets. Adopt more of a trader mentality; wait for better entry points, options you believe in long-term.
A constant bull market is a lot more fun. But play the long game – think in years and decades, not weeks and months. Avoid the looming danger. Don’t be simple and suffer!