Like many fields, investing is made out by those who most profit from it to be a difficult endeavour. One that most of us shouldn't attempt. We are encouraged to leave it to the experts, which means handing over our money and paying the fees. 

I was looking at the most recent US market cycle from the low of March 9, 2009. In a word - astonishing. The annual gain is roughly 14% compounded and when you see that on a historical chart, it perhaps gives you more reason to be cautious.  

Rather than the buy and hold approach which leads at times to large losses, our observations from history show there are times where it pays to be more conservative, keeping your powder dry and waiting for the storm to pass rather than attempting to meet it head on.

Just using long term valuation metrics shows that basically every asset class is expensive - US stocks on many metrics, gold, bitcoin, and residential property in many countries. Much of this can be put down to the simple cause, which is an explosion in debt. 

Given what I understand about market history, that simply cannot continue forever. As Herb Stein said, "if something can't go on forever, it will stop". 

As most of you know, we focus on not losing money rather than trying to make money all the time. It is simply because there are times when it is exceedingly difficult to make money, and I think we are approaching that time.

As we head towards the end of the year and with next week's US election, I do think it is time to be prudent. That means perhaps rebalancing with a focus on retaining more cash. The end of the year is usually a good time to be in stocks but if you are a long-term investor, then it won't make much difference to miss out on a short term 5% if market decline 5% or more which I suspect will happen at some point.  

The key to investment success is asset allocation and by extension rebalancing. 

Given valuations levels of all asset classes, we think a prudent approach will work in the long run.