I've always wondered - what are you going to do about a high CAPE value if you are a Millenial or GenZ investor with 30 years to go before retirement? Are you going to stop maxing out your 401K into an index fund every paycheck? IMO, that would not be advisable.

I think they need to keep saving, perhaps even more because of the lower predicted returns, but that doesn't mean they have to put it all into an S&P500 tracker. I'm in the UK, so not an expert on the US market, but midcaps (S&P400) look noticeably cheaper than the 500, so monthly averaging into there would presumably have less downside risk. (I'm thinking that given current valuation levels and as a general strategy, protecting the downside is the most important thing.) It feels like most index investors in the US are buying the 500, which might be part of the reason it's more expensive than the mid-caps. They could also put some money into bonds / treasuries. e.g. a traditional 60/40 split, or an 80/20 split, but using the S&P400 instead of the 500. It seems clear that this is probably not a good time to be 100% in rich US stocks.

SA

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