What are the best investments for the next five years?

valueinvesting
investing

#1

For someone looking to invest, once they have started properly earning some money…

What is the best investment opportunity for the next five years?


#2

I think the best invest today would be holding your cash until there are much cheaper opportunities…

I will tell why…

Cash Is At A Record Low

In today’s market place, the cash held by investors is at record lows. Even at the height of the dotcom boom, investors were holding far more cash than today.

According to data from Morgan Stanley, client cash was standing at roughly 13.4% in Q1 2000. Today, the figure is sitting at roughly 11% in Q3 2017.

The historical average is 15.6%.

History would suggest it is absolutely fatal to be invested in times of low cash holdings. In Q1 2009 when cash was at 23.5%, it was probably the best time to invest in the market in the last ten years.

On the other hand, the first quarter of 2000 (13.4% cash) was the worst time to be invested.

Hold off on investing for the moment…

Are Index Funds In A Bubble

Index funds have been one of the biggest themes of the past ten years. Many investors have turned away from expensive active managers and moved their money into the S&P 500.

But is too much of a good thing a bad thing?

Well it could be. …

US stocks are at their most-valued in history. This is according to six different comprehensive measures…

Including using Warren Buffett’s favourite measure of value…

• Price to Sales
• Price to Book
• Total Debt To Assets
• Board US Corporate Leverage To GDP (Highest Ever!)
• S&P 500 Median EV To Sales
• Enterprise Value to Free Cash Flow
• Shiller CAPE Ratio (Warren Buffett’s Favourite Measure Of Stock Values)

The last one is significant because Shiller showed that high CAPEs lead to low long-term returns for index investors investing for the long-term only…

Maybe this explains why the inventor and pioneer of the index fund has said that investors should not expect high returns in the next few years:

Until things get cheaper, I would keep your money held in cash, or gold. Not in the stocks and especially not in FAANG stocks!

Happy christmas!


I took the graphics from Crescat’s 2017 letter for Q3. sing up to their investors letter here:

https://www.crescat.net/investment-process/investor-letters/

They have outperformed the benchmark significantly with all of their funds and are one of the best performing macro funds. I have no affiliation with Crescat…

I am just a fan!