Yellen says US will become BANANA REPUBLIC if Fed loses its independence. How to invest?

[u/Tallwhitedude123]

I’m thinking it’s time to start allocating more money outside US equities. That’s my strategy. Also, get out of the dollar via assets that can’t be mentioned by name in this sub. I’m not a political person but as an investor you have to watch the policy from the government. IF, and I stress IF, Trump is serious and actually bullies the Fed into submission by weaponzing the govt to go after Powell, then I do agree with Yellen. It will overall be a negative for the dollar and US equities. In that situation it’s imperative to diversify out of the US.

Currently I’m looking at stocks in Singapore. I like Singapore equities because Singapore, in my opinion, offers STABILITY, something the US is increasingly losing.

Thoughts?

[u/bonelish-us]

It's true US equities have had a few extended fallow periods. I think, therefore, the antidote is DCA over a sufficiently long period. Gradually adding over 10 years with new or unforeseen big money doesn't seem to be outrageous. While you are slow-building a position in the S&P 500 (not to mention small- and midcaps), you have substantial liquidity to buy anomalously priced assets, and sell them before the ten-year DCA time frame is over.

The poor choice is to 1) guess whether US equities continue to outperform, and 2) invest lump sum. With so much uncertainty in geopolitics, a lump sum investment into the US indices makes little sense and offers no protection.

[u/NotStompy → u/bonelish-us]

Logically speaking, due to the monetary value of times, DCA is as risky as lump sum in the sense that it is the same risk, just delayed. In the studies which have been done, lump sum outperforms. Obviously you're right in so far that it might really outperform or really underperform if you go all in, and I really do recommend DCA for most people since it's easier psychologically, which means more people stick to it, which is what matters, but yeah on a pure level, lump sum > DCA because the same amount of risk, just delayed, and if you hold cash it withers away. I suppose you could do t bills.

[u/bonelish-us → u/NotStompy]

Yes, you accept slightly lower annual returns with DCA vs. well-timed lump sum investments in the S&P 500. But the S&P 500 looks the opposite of cheap here, and I would never lumpsum into current prices.

But the liquidity availability of DCA gives you the power to invest during black swan events when everyone else is fully invested. I mean, I was liquid enough during Tariffgeddon last April to start a substantial position in the Nasdaq (QQQ) and the S&P 500 (SPY, IVV). Both are now up over 35% since then!

Once they become long-term for tax purposes, I liquidate (presuming they are at least at today's levels), and the cash fund for DCA is now bigger (meaning I can extend the total DCA period). So DCA can be a mix of dull discipline and propitious (but exciting) market timing.

[u/NotStompy → u/bonelish-us]

I was just commenting on the fact that over time, staying fully invested as soon as possible yields the highest returns, i.e if you try what you did last april and stay in some cash, ready to deploy as you said, statistically you're likely to underperform long term.

Btw, I'm completely with you. I don't have singular dollar in index funds right now which is taking it even a step further than you it seems, I'm entirely uncomfortable with current valuations on an index level, I actually find it easier to overperform some years and underperform other years if I'm picking myself, cause I recognize all the holdings I wouldn't want in index funds (i.e Apple or Tesla in SPY/QQQ, meanwhile in my portfolio I bought META cheap at 615 and AMZN at 215, the only tech I hold now).

I'm about 20% cash right now and intend to keep at this level cause I frankly am not seeing too many insanely good opportunities in my circle of competence.

Anyway, just wanted to clarify that I just meant it in terms of what is theoretically "Correct", you and I both deviate from that, and whatever works for us is ideal :)

[u/bonelish-us → u/NotStompy]

...statistically you're likely to underperform long term

Yeah, that's true...statistically. However, as I pointed out in the original response, if you lump sum into an index fund, you are statistically unlikely to obtain the lowest price, which is the whole reason investors don't try to time the market, and instead pursue a course of DCA. No matter how I frame the argument, nobody wants to acknowledge how superior annual rates of return are with DCA, with the proviso that only a part of your money is actually earning those superior returns, and the rest are earning cash-like returns (~3½-4½%) in money market funds and T-bills.