It’s one thing to worry about steep equity valuations, it’s another thing to do something about it.

As major stock market indexes carve out new highs after a stunning seven-month rally, some observers are warning that valuations are stretched.

Federal Reserve Chairman Jerome Powell said last month that stocks are “fairly highly valued” – a big statement for a central banker whose usual focus is on inflation and economic activity.

Bank of America strategist Savita Subramanian warned this week that nearly half of the 20 valuation metrics she uses to assess the S&P 500 are higher than they were at the peak of the dot-com bubble in 2000.

A couple of weeks ago, I asked you for your thoughts on whether an equity bubble was forming – and if so, what were you doing about it?

The responses turned this humble newsletter into something that resembled a savvy investor roundtable: Many of you are concerned about rising valuations, but prefer slight portfolio adjustments and slow changes over sudden and dramatic moves.

That makes a lot of sense.

While many of us might entertain the idea of selling our equity holdings at the top of the market and waiting comfortably on the sidelines as stock prices decline, we are also aware that market timing is notoriously difficult to get right.

But that doesn’t mean you must sit idly as rising equity valuations flash warning signs. A few nips and tucks might deliver peace of mind – and a more resilient portfolio.

One simple approach that some readers are taking: They are cutting back on dividend reinvestment plans.

DRIPs automatically use dividend payments to buy more shares in a company or units in an exchange-traded fund, sometimes at a discount to the current price.

But if you are worried about a bubble, you can always terminate the DRIP and take the dividends in cash instead.

“Rather than purchase more shares at these possibly elevated prices, I will accumulate some cash and deploy as opportunities present themselves,” one reader said.

Another approach: Some readers are trimming individual stock holdings and taking a more diversified approach.

Individual stocks are great, but they can also expose investors to company-specific risks. High-flying stocks with extreme valuations might be particularly exposed to a market downturn.

Larger baskets of stocks that track major indexes might offer some safety.

“I have felt a U.S. equity bubble has been forming for over a year now. In January, I decided to sell all my individual U.S. stock holdings and move the funds into my S&P 500 ETF,” one reader said.

Over the past three months, the reader has taken another step: He has sold units in his S&P 500 index fund and diversified further into a balanced fund – which tracks stock and bond indexes – and one that tracks markets in developed economies, including the U.S.

A third approach: Hold more cash than usual.

A few readers said they are sitting on cash that is equivalent to about 20 per cent of their holdings. That way, they are partly insulated against a market downturn, and can pounce on deals if they arrive.

Sure, that smacks of market timing – but they are still mostly invested. And as some readers pointed out, stocks are up so much this year that even a 25-per-cent bear-market correction simply takes the S&P 500 back to levels last seen in April.

That would hurt. But at least readers are prepared.

I’m enjoying participating in this investor roundtable discussion with you, so let’s keep the ideas circulating.

My question this week: What do you think will be your safest investment over the next year? It could be a stock, a bond, a commodity, a fund, you name it. Let me know at dberman@globeandmail.com.