Escape from growth stocks bubble

I have a question. There are more and more voices that we’re living a growth stocks bubble. See, for instance: Why Grantham Says the Next Crash Will Rival 1929, 2000 - YouTube

This guy is suggesting re-allocating to green stocks, value, and EM? What do you think about it? Are you preparing for a potential crash coming?

Yes, I keep my regular contributions and rebalancing schedule :slight_smile:

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When i started investing around 2015, there was already talk about a potential bubble and look where we are now. I am simply a bit sceptical of the many proclaimed cassandras at this point. Maybe it will be to my detriment.

But generally it also does not sound wrong to focus more towards the stocks you mention?

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This sounds like “grass is always greener on the other side” delusion :wink: .
If there is a crash, politicians will as a first priority put ecology into a drawer for a while.
EMs may take a hit with rising bond prices.
Value? Why not… Is there still something like that?

Already did by chosing the right asset allocation for my risk tolerance.

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Not actively preparing for a potential crash but indirectly I wanted anyway to add more value stocks and emerging markets to my assets so I redefined my asset allocation strategy for 2021 to include small cap value and emerging market for a total of 25% of my asset allocation. Then beginning of this year I re-balanced by selling some VT in order to buy AVUV, AVDV and AVEM.

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i just reduce VTI and move more to VWO VEM

Factor timing works as well as market timing.

I am convinced that value, profitability, conservative investment and momentum have a higher expected return based on the research I have seen. This seems especially true for small caps.

That is why I have a small cap value tilt based on the Dimensinal/Avantis approach.

If you believe that this is also true, then by all means, add a value tilt.

Otherwise I wouldn’t.

Value might underperform for another 10 years.

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Thanks for the answers. I pretty much agree with you. I’m thinking about adding small cap, value, EM tilts since I’ve joined this forum 3 or 4 years ago. Maybe it’s a good time to finally implement this. The current stock market situation is really uncomfortable.

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Which ETFs are you considering?

Now is a better time than ever.

With Avantis and Dimensional entering the etf market, it is now possible to invest into factor funds with the desired factor exposure.

We are seeing a very strong v-shaped recovery and are in for a huge stimulus program from Biden (likely another 1tril). Inflation meanwhile is low and no sign of a recession at all. I believe it when some say that we will see an immense increase in earnings this year. :rocket:

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@1000000CHF that is the thing. you’ve got to be ready to face that. I am sitting on some India value fund since 3 years. It has been tough, seeing everything going straight up but this funds.
I also agree with @xorfish regarding avantis/dimensional, and/or small value approach and am doing 60-70% VT-esq + rest split among AVDV, AVEM, AVUV/SLYV, and RPV. But, totally ready to underperform more years.

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If the increase is too modest companies can buy more shares back like Apple recently, boosting the EPS.
It’s done with new debt which is anyway bought by central banks, so it’s more free money flowing into the stonk market :smile: !
Bullish :rocket: !

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QE doesn’t add new money to the economy, it just changes the liquidity of some of it the money in it.

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I was speaking about markets, not the economy…

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The bubble might just have grown.
Doesn’t mean it’s no bubble.

It’s real. Though might continue a bit longer with all that liquidity available.

Diversify. Personally I’m buying no funds in which Tesla is a top-10 constituent (but that is just an example).

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Perhaps after all it’s not a bubble but some sort of inflation.
A real estate developer said once in an interview: “a bubble it’s when it bursts”.
I found it dumb first, but over time I found many examples where prices jump to a higher range and never come back significantly lower.

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Doesn’t mean that there is a bubble either.

Some Nobel laureates don’t think bubbles really exist:

The word “bubble” drives me nuts, frankly, because I don’t think there’s anything in the statistical evidence that says anybody can reliably predict when prices go down. So if you interpret the word “bubble” to mean I can predict when prices are going to go down, you can’t do it. …

I believe markets work. And if markets work those things shouldn’t be predictable. If I can predict that housing prices will go down, if the market’s working properly, they should go down now … If the market’s working properly the information should be in the prices.

I don’t even know what a bubble means. These words have become popular. I don’t think they have any meaning.

http://economics-files.pomona.edu/GarySmith/Econ156/Lectures/FamaOnBubbles.html

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Quite possible. An inflation in asset prices due to market pricing mechanism having been distorted by excess liquidity.

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