The Ignorant Investor

I've spent the past couple of months locked in investor paralysis. This condition is caused by the inability to choose between two options that both appear to make sense. In my case, it involves several decisions.

First, how big a proportion of my portfolio should I be holding in cash? Right now I'm sitting on a pile of dollars, and according to the principle that there is no way to time the market that money should be invested in typically more productive investments. Yet somehow I can't make myself buy in right now. The market appears to be efficient right now, fairly priced at historical multiples, and the profit picture over the next 1-2 years (which is what I think market's basic horizon is when it comes to valuation) is looking anemic.

Second, even if I go for equities, how much should be invested in this country, and how much abroad? I don't like the way our government's fiscal policies look, but what do I know about the effects of currencies and the prospects of foreign stocks? Nothing. And it's always hard to invest in things you don't know anything about. Or at least it should be.

Third, should I sell my positions in individual stocks and focus purely on mutual funds? I've already decided never to buy another share in a company, but I'm torn about keeping positions in my current portfolio open. To sell all of them at once will result in substantial tax liabilities, and yet a gain isn't a gain until you get the cash in hand. And since I don't see capital gains taxes going down any further, there's a good chance there will never be a better time than the present to pay the government its share of the money I've made by owning GE, BP, and GSK over the past 15 years. These are what I refer to as my "relationship" stocks- they've been good to me all these years, but honey, at some point we need to see other people, you know?

Anyway, that's what's on my mind right now. Paralyzed by indecision. I'm not confident on the future, not sure what to do. Getting frustrated. Or maybe it's just some kind of financial mid-life crisis. I just don't know.