I believe nobody can predict the market, and timing it is impossible. But honestly, I’m nervous. Here’s why:
We’ve been through some tough years with inflation—the worst in decades. The lower class has been hit hard while assets like stocks and real estate soared. Meanwhile, younger people face crazy tuition costs, unaffordable assets, and record government debt.
The way I see it, the Fed has to stay hawkish. We just can’t take another inflationary hit. Wealth inequality is at an all-time high, and I feel like the only way forward is to lower asset prices to ease the gap.
Am I missing something? Is there a flaw in how I’m thinking about this?
You’re worried about trends, but let me throw some data at you:
Wages for the lower class have seen significant real growth. Source
Income inequality is actually lower today than pre-COVID. Source
Debt service levels (not total debt) are manageable compared to the 90s. Source
Average college debt is $38k, and graduate salaries are rising faster than ever. Source
As for your comment about the Fed bringing down asset prices to control inflation—it’s not true. Asset prices don’t directly factor into inflation, and equities have done well even during the recent rate hikes.
Your analysis seems to contradict your belief that timing the market is impossible. If you’re this unsure, just invest in the index. The data doesn’t back up the doom and gloom.
If you can, start another business. Focus on building income and set up automatic investments. It removes the stress of trying to time the market. Set it, forget it, and focus on earning.
Your concerns make sense, but historical data says lump sum investing is usually best. If you’re still uneasy, try dollar-cost averaging over 6-18 months. Stick to the plan, but if there’s a big market drop, maybe invest a bit more that month.
I was thinking of splitting between SPY, QQQ, RSP, IJH, VTV, ITOT, and VXUS. My main question is whether I should also add bonds like GOVT, and how much.
You could simplify that a lot. Just sell puts on SPY or VTI to get your allocation, then sell calls. It’s an efficient way to get into the market while managing risk.
I’ve thought about padded indexes, but the fees (75 basis points) seem too high. I could build my own with options, but I still want exposure to those ETFs. Spreading across them feels like a less padded, but diversified, approach.
Your concerns aren’t entirely wrong, but here’s the thing: the average US earner is better off compared to many other countries. Home-to-income ratios in the US are more favorable than most places, and fixed-rate mortgages are unique here.
You also said timing the market is impossible—so why not just get started? These same fears existed three years ago, and the market kept moving.
You’ll never time the market perfectly. If it makes you feel better, invest gradually over a year. Pick a set day each month to add more and stop overthinking it. Stick with your plan and let the market do its thing.