Ok we are at the top of a market. What should you be doing?
First and foremost, you should be pruning those investments that are likely to fare poorly in a down market. Don't fool yourself. Everyone and every portfolio has investments that WILL perform poorly in a down market. While the entire portfolio will drop, these weak investments will fall way more than average. Don't fool yourself. Be candid. The best time to prepare for a storm is BEFORE a storm.
Second, you should be building a "Wish list". What investments would you like to own, but are just too expensive now? Having that list is important because you need to be ready when the time comes - keep your powder dry. You do need to keep in mind that when the economy tanks, those "wish" stocks may not just fall in price, but in value. By value, I mean the intrinsic value of the firm may be significantly affected by economic environment. Since you will be already familiar with those stocks, a quick re-evaluation will not be too much.
Third, you should be building a larger component of cash. Buffett never puts all his cash to work! He always is the man with cash when everyone else is cash poor. He forgoes the short term small gains for huge long term gains.
