I have exactly the same problem. Michael Burry (notable for profiting off of the 2008 housing crash) is predicting an enormous index fund bubble, or the "safe" investments that people are so fond of in 401ks and IRAs. Even the market indicators like the S&P 500 are somehow outperforming the prior year.

High-risk investments and stock picking is high risk and a bad idea; index funds are a bad idea because they're overvalued; cash is a bad idea because of the inflation risk; where should a young person (<40) put their money?

I wouldn't even mind hearing "there is no safe investment right now, buy real-world assets like land and weapons and wait for the crash", but I only hear that from gold-standard idealists, not from professional investors. What do the investors recommend?

I don't know how sophisticated of an answer your looking for, but I can tell you what I'm doing.

1. I have a standard portfolio of index funds split between stocks, bonds, real estate and cash, weighted more into bonds. The bonds and cash weight is because I think the market will tank at some point, the stocks are because I might be wrong.

2. I rebalance periodically to take profit from whatever is doing best.

3. I've tried to broaden my investments further by adding a "market neutral" fund from Vanguard, and an asset fund.

That's the basic setup. As I said, I'm pessimistic about the stock market, but not out of it, so I've based my allocations on that. I'm not too worried about index funds being a bubble themselves. If the market goes down enough to trash index funds as a class, there won't be anywhere to hide... That's why I'm trying the market neutral fund. I'm hoping it won't correlate with the stock or bond market. That's my big concern, that everything will crash at once.

I am somewhat concerned about the Fed's actions, so I have added an asset fund in case we end up with more inflation than people expect.

Personally, I think we will have a crash, but I've been wrong so far. I just don't see how the market will go up rapidly for another 5 years, and if it doesn't, that doesn't justify the current prices, but who knows...

Im putting some everywhere, and looking to take out a loan to put some cheaply loaned capital into desirable real estate. Crossing my fingers.

There is really no way to time the market. If you could do it, you’d be rich quickly and massively. The only sound advice is to buy an broad ETF, preferably by Vanguard, and just hold it for a long time. You’ll probably make something around 12-15% per year compounded after a decade or so. Will your portfolio be at 50% of its initial value at some point? Could very well be. You need to see through it and just hold the stocks.

Read JL Collins for more depth.

https://jlcollinsnh.com/manifesto/

> 12-15% per year

That seems unreasonably optimistic.

It's not. I've had a Vanguard account since 2007. My 10 year returns are right in that range.

I've had a Vanguard account since 1997. 500 index. Put the minimum in at the time and never touched it since. I do not have 12% annualized returns.

Indeed, I just checked portfolio visualizer, which gives a 1997-2020 return of 8.5% CAGR for the 500. My guess is you started adding in 2007 (so your principal was very small during the great financial crisis) and you've been adding during the entire recovery. You don't know how lucky you are. Of course, maybe you just bought QQQ in 1997. Again, you don't know how lucky you are.

The number of fallacious assumptions embedded in your syllogism is difficult to unpack. I'll start with one, past returns are not indicative of futures results. I'll add another, the relative expensiveness of stocks at a given point in time are negatively correlated to long-term future returns. Someone won a nobel prize by illustrating the last one.

Yes, I started that account in early 2007, painfully added through the financial crisis, and just kept on adding. At some points I was adding over $1K/week, every week, year after year. I invested heavily in growth (VGT and MGK ETFs, specifically) which boosted my returns, especially over the past 5 years.

Of course, past returns are not indicative of future results. Of course, stock prices are expensive right now. But what is the alternative? CDs? Bonds? Look at any long term chart. I'll take the risk.

>Look at any long term chart. I'll take the risk.

There are 30 year periods where US stocks (spy 500 or a close proxy thereof) posted a negative total return. Are you prepared for that?

My larger point is that 12-15% return assumption is absurd. There are very few long-term periods where that has ever been achieved in the US market, most (but not all) of which were followed by a deep and long-lasting correction.

The alternative is to assume a lower return like 5% and plan accordingly.

Despite these huge gains over the past 10 years, I do agree with you. I plan for a 3.5% withdrawal rate during retirement (hopefully early retirement.)

You can still plan for a 3.5% withdrawal rate and be way off of what you need to retire if you are assuming a 12-15% return rate.

I already hit my FIRE goal, so not a problem for me.

Good for you, but your FIRE goal either explicitly or inherently assumes both an inflation rate and an expected return rate. It is crazy to ignore both as you seem to be doing with your statement that you are safe from failing to meet 12-15% returns simply because you are assuming a 3.5% withdrawal rate. In addition to inflation and expected return, you also should consider max draw down potential.