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Re: Stock Market Overpriced?
Old 05-01-2005, 03:10 PM   #21
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Re: Stock Market Overpriced?

Vanguard shows the PE of their S&P500 fund and the index itself at 18.3

Historic average is in the 15 and change area. Average for the past 25 years (weighted heavily by the 45+ numbers from the late 90s) is in the vicinity of 18.

Morningstar fair value shows the total market as being between 3 and 4% overvalued.

Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Re: Stock Market Overpriced?
Old 05-06-2005, 06:54 AM   #22
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Re: Stock Market Overpriced?

I've struggled with this same issue recently. I'm in the buy and hold indexes camp but the giants whose sholders I try to stand on are shouting up at me not to expect the next 10 years of returns to be anything like the last 10. What's a person in the middle of their accumulation phase to do?

Right now I'm figuring out an asset allocation that I could stick to for 5-10 years. For me this'll be more than 1/2 international equity, inc. as much EM as I can stand. (Another nice thing about the foreign index ETF's is they're held in the local currency, so you can diversify currencies as well as asset placements.) Indexes are great but the 'put all your savings in a broad US index' advice just ain't what it used to be. For me, an asset allocation to get money out of the US makes sense. I don't mind buying the US market as it meanders for 10 years, I just don't want everything I've accumulated so far to be sitting in it.

Also, speaking as a 30-something male, we guys can be susceptible to too much tinkering with our portfolios -- not good for long term returns. So I'm hoping an asset allocation plan will give me something to do (rebalance, maybe shift things a few percentage points each year) to make me think I'm doing something and keep me out of trouble. I may also need a little gambling money for the same reason.

Anyhow, good luck.

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