So how much of your money should you keep in stocks?

"Probably a lot more than you think," writes Wall Street Journal columnist Brett Arends. "Long-term returns from equities have beaten alternatives such as cash or bonds."

Editor’s Note: Get These 4 Stocks Before 399% Stock Market Rally!

And it's difficult to time the market's short- and medium-term moves, he notes.

Andrew Smithers, a London-based financial consultant, concluded in research with London University economics professor Stephen Wright that long-term investors should devote at least 60 percent of their portfolio to stocks, even during bubbles.

Smithers offers three reasons, Arends writes.

• First, "average returns from stocks have historically been so much better than alternatives that even overvalued stocks are likely to prove a reasonable bet," Arends says.
• Second, "history has shown that overvalued stock markets often become even more overvalued before correcting back down"
• And third, "investors who try to move completely into cash when markets are up usually intend to buy back in when stocks have fallen to more appealing levels, but they often don't."

The S&P 500 had a trailing price-earnings ratio of 18.97 Friday, up from 17.81 a year earlier, according to Birinyi Associates.

Meanwhile, Nobel laureate economist Robert Shiller of Yale University has been saying for some time that stocks, bonds and real estate all are on the expensive side.

"'Right now a lot of things are looking pricey. So don't expect good returns," he told This Is Money news service.

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