The Barefoot Investor Scott Pape has warned Aussies against rashly pulling their superannuation and share portfolios out of Australian and US index funds over fears of an impending market crash.
A reader wrote to the personal finance guru asking for advice on whether he should withdraw his investments after seeing billionaire investor Jeremy Grantham’s interview on The Diary of a CEO podcast. The reader said he was 42 and wanted the “best bang” for his buck over the coming decades.
“[Grantham] reckons you should get out of US stocks and into emerging markets and bonds. He manages $78bn, so he seems to know a thing or two, and his arguments sound logical,” the reader wrote.
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Grantham, who predicted the dot-com crash and the 2007 US housing collapse, warned on the episode that the AI bubble would be the “biggest investment bubble in American history” and cautioned investors against owning US stocks.
He warned US stocks were “badly overpriced” and said he was not confident that would be intact in “5 years, 10 years”.
Pape said he agreed with a “fair bit” of what Grantham said regarding the US market being overvalued, crypto being “mostly worthless,” and the similarities between the AI boom and the dot-com bubble.
But he said he came away from the interview feeling “dirty” and cautioned Aussies against making drastic changes to their share portfolios.
“That podcast felt like the financial version of a married bloke on Tinder. The whole thing is designed to make you restless and think ‘Maybe I should ditch my boring old index funds for some sexy emerging markets’,” Pape wrote.
“Heck, the episode is literally called: ‘Billionaire’s WARNING: I’m SELLING. The Crash Is Already Here!’
“That’s a rubbish way to invest your money.”
‘Greatest advantage’ on Aussie’s side
Pape likened a share portfolio to a marriage and said he “put a ring” on his portfolio years ago, vowing to stick with it through the good times and the bad.
“History shows shares deliver the best long-term returns of all investments, even though they scare the living daylights out of you sometimes,” Pape said.
“Every crash has eventually been followed by new highs. So I keep a few months’ cash in the bank and accept that happily ever after only exists in fairy tales.”
Pape said Grantham might be right about the market and it could crash next week, but to make money people would need to be right twice.
