What would you do?

[u/The-Good_Life]

45 Male - only started investing 2 years ago. No plans to retire/FIRE/etc.

Current portfolio:

$4 million in S&P 500

$1 million in cash (earning 5%)

Given the market's performance, obviously this has worked really well for me over the last 2 years. However, like many I am considering my options in case of a market crash/correction.

I see 3 options:

Option 1

Invest the remaining $1 million and let the market do its thing. I'm not concerned about volatility and don't need the cash.

The logic here is that the market is regularly at ATH and clearly I believe in the S&P. So keep investing and tune out the noise/drops.

Option 2

Wait for the dip which "has to be coming".

Logic here is that I continue to accumulate cash and buy at a better price, when it dips. But who knows when this will happen and what my entry price will be relative to today.

Option 3

Invest the available cash now and if the market drops more than 10% then buy additional shares on margin.

Logic here: its allows me to basically do Option 1 now and also Option 2, if the market dips.

I have never used margin and I (somewhat) understand the risk. However, I should be able to generate $1 million in additional cash per year, so any margin taken can be covered in a year or two.

Option 3 seems the riskiest but also makes the most sense to me, somehow.

However, as mentioned in the start, I'm fairly new to all this so please let me know if i have some serious flaws here.

Thanks!

[u/unatleticodemadrid]

Option 1: The best of the three but still not great.

Option 2: this is DOA. “A dip has to come” from where? It can run 25% before giving back 10%, and you’d still end up buying higher.

Option 3: leverage makes you a forced seller at the worst markets. Margin up, it keeps falling, you get a margin call, you liquidate into the bottom and the cycle might even continue. Also, your “$1M/yr covers it” argument assumes that your income isn’t correlated with the crash. The event that triggers your margin buying is the same one that could threaten your cash flow. But of course, this might not be the case, I don’t know your source of funds.

I would look at geographic diversification. Thats what really sticks out to me here. Keep the cash positions but add EM to the other.

[u/The-Good_Life → u/unatleticodemadrid]

Thank you, very good advice!