Gyroscopic Investing

I have some new money to invest, but since the broad stock market has gone up quite a bit (higher than median/average PE ratio - S&P is at around 20, with median being 14.5 - see http://www.multpl.com/ ), I was thinking of buying 25% each of XLP (Consumer Staples ETF), Bonds, Cash and Gold.

Has anybody tried this or something similar before?

Consumer Staples have done well throughout stock market history when adjusted for volatility.  Utilities sector also tends to perform better or less-worse than stock markets during declines, but due to their dividends they tend to behave somewhat like stocks and somewhat like bonds, so I didn't want to go that route.

Any thoughts/suggestions are much appreciated.

-JT

since the broad stock market has gone up quite a bit

If you're going to tinker, I think Harry went in the other direction before he settled on the S&P or a total market index for stocks. That is, he selected some aggressive growth funds for maximum volatility.

Still, you never know how far the market in general is going to go. Just because it has (barely) set a new record doesn't mean it won't go further. It will almost certainly set  a new record sometime in the future, right?

Most importantly, even if your staples or utilities idea works out, how will you know when to exit that strategy and get into the broad market?

Just my two-cent rubber stamp.

dualstow wrote: Harry went in the other direction before he settled on the S&P or a total market index for stocks. That is, he selected some aggressive growth funds for maximum volatility.

Thanks for the much needed perspective.  After reading your reply I am thinking that I shouldn't be looking at PP along the lines of "buy-low-sell-high".  PP goes up more often than stock markets and goes down less often than stock markets.  The protection for "stocks have gone up too much" is already built into PP.

I think I will divide my new money into two different portfolios:
1. Scale in to consumer staples over next 5-6 quarters - to capture any remaining market gains and limit downside.
2. Scale in to traditional PP over next 5-6 quarters - because I've no idea what market will do.

Do both Staples and Utilities; equal weight.  It outpeforms any other allocation historically and with less drawdown risk.  But do keep in mind Utilities are increasingly going free market so their safety days may be numbered over time.