Summary: Trying to sell before a crash or wait for one before buying usually fails, even when the argument is well reasoned and data-backed. Nobody, however smart, knows whether a bubble pops in three months or thirteen years, and the bottom of a future crash can still be higher than today’s price, while you miss dividends on the way. What you can control is your time horizon and your volatility tolerance; diversification, “the only free lunch”, handles the rest.
Key ideas
- Even if a crash comes in three years, its bottom might be ~8,000 on the S&P 500, above the ~7,722 at recording, and you’d also have missed the dividends (lazy-investing—111-the-ai-bubble, tamir).
- Case study: a well-reasoned November 2024 post by a known financial blogger argued the S&P 500 was very expensive. Someone who pulled ₪100k then missed ~11% in shekels over two years (~30% in dollars including dividends, the gap due to the shekel’s sharp rise) (lazy-investing—111-the-ai-bubble, tamir).
- Selling an Israeli apartment in 2014 because prices “had peaked” missed six more years of strong gains (lazy-investing—111-the-ai-bubble, tamir).
- The only things you know are your investment horizon and your tolerance for volatility; those, not forecasts, should drive decisions (lazy-investing—111-the-ai-bubble, tamir).
- Diversification across companies and sectors is the only free lunch (Markowitz), unlike South Korean leveraged funds on a single company (lazy-investing—111-the-ai-bubble, tamir).
Disagreements & open questions
Takeaways
- Don’t sell or delay investing because of bubble talk; decide by horizon and volatility tolerance (lazy-investing—111-the-ai-bubble)