What High(ish) Equity Valuations Mean for Your Retirement Plan

All the consternation is around low bond yields, but high equity prices are also worth troubleshooting. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_improvingfinances&utm_content=31575&elqTrackId=6752b581aee84cff896384cadff4fb02&elq=8f1ece923a5d410bad612ead715036b4&elqaid=31575&elqat=1&elqCampaignId=14616) [Improving Your Finances] Improving Your Finances with [Christine Benz]( [Christine Benz] For more than five years now, we stock investors have been trying to reconcile two countervailing forces. On the one hand, stocks, especially U.S. names, seem pretty expensive, having run up with little interruption for more than a decade. And headlines do seem to be pointing to economic activity like business travel slowing in response to the Delta variant. On the other, hand, what’s the real alternative? Cash and bonds may buy you some peace of mind amid equity volatility, but you may not have any return at all once inflation is factored in. The fact that other investors have likely reached a similar conclusion could continue to push up stock prices. I’m of the mind that your response to that conundrum boils down to your time horizon. If you’re many years from retirement, your best bet probably is to hold ample equity exposure and do your best to tune out the volatility. If you’re closer to needing to spend some of your money, you should think about de-risking your investments at least a little bit; an all-stock portfolio is too risky. You’d also want to think employing conservative assumptions for withdrawal rates and future returns. I wrote about these and other considerations for pre-retirees and retirees in a lofty equity market in [this article](. Another possible response to the current market environment is to reposition within your equity exposure. Cambria chief investment officer Meb Faber made a compelling case for non-U.S. names in [a recent conversation]( with Jeff Ptak and me. I also appreciated [the recent discussion]( between my colleagues Dave Sekera and Susan Dziubinski; Dave highlighted which market sectors are looking cheap and dear today, based on Morningstar analysts’ bottom-up valuation work. Finally, if the ebbing of summer and the lingering Covid-19 pandemic have you thinking wistful mid-September thoughts, check out [the recent conversation that Jeff Ptak and I had with Dr. Laura Carstensen]( who heads up Stanford’s Center on Longevity. She brought a huge amount of wisdom and heart to the conversation, so please read the whole thing. But I especially loved her positive take on the enormous strides that humans have made on the longevity front over the past century. “What our ancestors did in the 20th century was really to nearly reduce premature death, greatly premature death. That was the accomplishment… Now, we were handed these 30 extra years of life in the 20th century with no strings attached. It was like here, our ancestors hand us more time and more time is of course fabulous. It means more time to chase our dreams and realize our goals and spend with our loved ones. This is time. And so, it's a great gift and we should not forget that.” I won’t forget, and I hope you won’t either. With warm regards, Christine Morningstar.com's annual Portfolio Makeover Week showcases real-life strategies for navigating the most common investing questions. Our 2021 makeovers will feature the before and after portfolios of five investors at various life stages and asset levels. Complete [this form]( by Oct. 8 for your chance to have your questions answered and your portfolio profiled by Christine Benz. [What High(ish) Equity Valuations Mean for Your Retirement Plan]( All the consternation is around low bond yields, but high equity prices are also worth troubleshooting. [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] [There's No Magic Number for Self-Funding Long-Term Care]( A single asset threshold seems appealing, but it may provide a false sense of security. [Read More]( [Laura Carstensen: 'I'm Suggesting We Change the Way We Work']( Americans don't just need to work longer, they need to work differently, according to a noted longevity researcher. [Read More]( [Do U.S. Stocks Merit Higher Valuations?]( Meb Faber, the CIO of Cambria Investments, doesn't think so. [Read More]( Listen Now Get the latest investing insights and market updates with [Morningstar’s podcasts]( available on your iPhone, iPad, Android, PC, or smart speaker. Stay connected: [twitter]( [facebook]( [linkedin]( [instagram]( [YouTube]( [Apple News]( [View online]( | [See all newsletters]( | [Share your feedback]( [Unsubscribe]( from this newsletter. Or update your [email preferences](. © 2021 Morningstar, Inc. All Rights Reserved. 22 W. Washington St. Chicago, IL 60602