As you probably know, I’m not an advocate of market timing. Jumping in and out of stocks is usually based on fear – either fear of missing out on hot returns or fear of more losses. However, if you’re going to do it, I figure you should announce your move beforehand, as opposed to making self-congratulatory pronouncements afterwards. “I sold all my stocks and my houses in 2007, right before the crisis hit as I knew something was fishy.” You never hear “I sold most of my stocks in 2009 and missed the potential doubling of my money since then.”
This is the predicament where I am today. I don’t think the stock market is very attractively priced. I don’t think locking up 2% yields for 10 years is a very good option either. Everything seems to be up, and our investments have swollen significantly. So while I’m not complaining, from what I can tell none of the things that were previously broken in the world have actually been fixed.
In addition to me being “meh” about the current investment outlook, having a new child has refocused us on shifting into part-time work as opposed to going all-out towards a full early retirement. Having the house paid off will free up our cashflow needs significantly, as our mortgage remains over 50% of our total spending. Once that is taken care of, it’ll be much easier to shift into part-time work as we want avoid using daycare as much as possible.
So for the rest of the year and probably into 2013, I am going to focus on putting new money towards paying down the mortgage. (Our 401ks and IRAs are maxed for 2012, and our current portfolio will stay invested.) This will effectively gain us a yield of 3.25% (our mortgage rate) for however long it takes to pay it off completely. Yes, we just refinanced this year, but we actually netted a thousand dollars from that refi due to negative points. Today, the S&P 500 Index is at about 1,435 and the 10-Year Treasury yield is 1.66%. Let’s see how wrong I can be.