How Much Should You Invest in Stocks?

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I use a varying percentage in stocks which is based on the current market PE. The percent I keep in stocks ranges from 87% when PE down to 10.4 or below (market about 35% undervalued) to 37% when PE up to or above 21.6 (Market about 35% overvalued). I readjust quarterly. The historical average for the PE using actual earnings, is about 16 over past 50 years. When market is at the average PE I keep about 62% in stocks. I use the last highest actual earnings to assess if the current market price is fair, high or low.
I feel this formula adequately protects me when market starts to reach a bubble, while still giving me a fair exposure to equities. It also takes advantage when stocks are bargain priced. My underlying assumption is the belief that the market generally reverts to the mean.

Joe M of FL 11:47PM February 10, 2012

i currently allocated 95% of my net worth into stocks. since then, i have seen over a 70% return on them (in less than 4 months). I believe that if you want to invest in stocks, you need to know exactly what you're investing in, this will increase your odds of generating a better return by making an informed decision.
Right now is the absolute best time to invest in my opinion, and i'm not alone in that thought. In fact, Warren Buffett and many other highly regarded investors and business leaders are investing heavily in this period.

Tony of MO 5:40PM June 21, 2009

we tend to forget our time horizon for retirement.holding bonds and cash only is nice for the short term but inflation will eventually eat up what returns you get from cash and bonds.
should you actually leave money to family members, the time horizon becomes 50 to 70 years at least. stocks might be able to beat inflation but cash,cds,and bonds sure as heck won't.
so, would it be wise to hold a larger percentage of stocks in your portfolio-example 65% 35 cash and bond

jim for of TX 10:11AM June 18, 2009

How could the equity market go much lower. My retirement investments [mostly mutual funds]dropped by @40% at the stock market low and are now up over 25%. There will be up's and down's in the future, but I see the overall market going nowhere but up over the next several years. I expect to see my investment back up over its high during early last year and going even further in the future.
Equity mutual funds / Bond funds and some quality stocks are my hedge for growth and gaining back what I lost in late 2008 & early 2009. Everyone has their own risk level, but bank interest and CD's will not get my money back that was lost in the last 12 months. I say "Go for it with the equity market in 2010 & 2011".

E. De Fouw of CA 4:39PM June 16, 2009

I BELIEVE THAT YOU ARE BETTER OFF WITH MONEY IN CDS THAN IN THE STOCK MARKET.I THINK I WAS SMART WITH 75%CDS AND 15%BONDS AND 10%STOCK.I STILL HAVE A LITTLE MONEY.

LULAMAE of VA 3:19PM June 16, 2009

Dear Philip,
Your article is very interesting and informative.
After working in Michigan for 27 years and looking at my retirement portfolio fall to an extremely low level I feel that there are no rules left anymore in stock market. I feel stock market is more or less virtual money than actual, and can go close to nothing in special circumstances (like global unrest or dollar depreciation).
People who make money online are day traders and people like me who were longs in companies like GM and Ford are nothing but under water. I feel that his is the best time to invest in real estate, gold and EURO.
- Tim,
Associate author,
saching.com

Tim of CA 1:32AM June 08, 2009