SINGAPORE (Dec 18): I have a friend, Tommy, who is very happy right now. At end-2016, he invested his year-end bonus in a mix of equities and bonds. Since then, stocks have been on a tear, with double-digit gains in most markets. Bonds have also done unexpectedly well, despite the spectre of interest rate hikes on the horizon. Time to stuff that Christmas stocking!

I have another friend, Sean, who is not quite so happy. Unlike Tommy, he decided to hold on to his cash last year, wait for US President Donald Trump to start a trade war and then buy in. Since then, he has watched in frustration as markets breached record after record with remarkably little volatility. Sean is now faced with a dilemma: Jump in knowing full well he is late to the party, or tough it out and hope for a correction soon?

Tommy and Sean might have had very different investment experiences last year, but they are actually in the exact same situation. What is past is past: The only thing that should matter to either of them right now is the future outlook on prices. In this regard, every investor is grappling with the same problem: After a fantastic few years, is it time to hold cash (or, in Tommy’s case, take some profit) and wait for a correction before re-entering the market?

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