When I hear the pundits talking about TINA, or 'there is no alternative', I start to cringe. It is this narrow-minded thinking that gets people in trouble. We often talk about paying less attention to the media chatter, laying more importance on the price action. That is always true, but sometimes we tend to 'hear' things in the distance.
The other day, I happened to catch someone saying this very thing about the U.S. equity market. Now, while I do believe the environment is MORE favorable here than elsewhere, I won't go 'all in' on the U.S. markets. Given so many other asset classes, diversification is the 'only free lunch' out there (thanks, Jim Cramer!).
Once you buy into the TINA concept, you're at risk. Certainly you can diversify around stocks, but to completely discount other asset classes is just foolhardy. Just take a look at bonds and gold which are having a stellar year so far (along with U.S. equities). With many of the risks present for the economy and the world, why would you not diversify into these other asset classes?
Have these investment vehicles run 'too far' in 2019? Perhaps, but even a balanced portfolio will have far less risk if the markets take a dive. Equity markets are near all time highs again, much like they were exactly a year ago. It was then we heard some noise about 'buy U.S. equities, it is the only game in town'.
Isn't cash an alternative you can choose? We don't always have to be invested, right? Having some dry powder is the smartest way to go.
How did that work out? October was a miserable month that led into December, one of the worst months we had seen in decades until the Santa Rally brought it back. A mixed portfolio would have lost money of course, but far LESS than 'all in' equities. Those who only owned stocks were waking up each day and going to bed at night with a nightmare on their hands.
The point here is this: Maintain some balance, choose your plays wisely and diversify away the market risk so you can sleep better at night. The uncertainty level is high now, and if you have some gains there is no reason to let them slide.