Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Barry Ritholtz: Many Metrics Can Be Used To Value Markets. Which Should You trust?
I think I'll stay with the often used Rule of Twenty. When the TTM P/R Ratio plus inflation are combined if the total is below 20 then value can be said to be found in stocks; and, if the total is above 20 then stocks are said to be overvalued. I have been using this model for sometime now and it's end results seems to run a good parrell to Morningstar's Market Valuation model's findings.
Market valuation is an open debate because there are many ways to value the stock market. I have decided to run with what works best for me. Another important thing to consider is a buying strategy as when secirities are bought has just to do as much in making a profit as to when they are sold (Buy low, Sell high).
Again, I believe every investor needs a speedometer(s). And, don't buy blindly and/or because another says value exist. Do your own due diligence.
I guess my reading comprehension skills are shot. So far as I understood it, Ritholtz spent nearly the entire article saying that choosing a single valuation metric was foolish, then concluded by picking a single valuation metric, justifies this by way of academic studies, and uses a single data point (2007 vs. today) to conclude that the market is not overvalued.
Comments
Market valuation is an open debate because there are many ways to value the stock market. I have decided to run with what works best for me. Another important thing to consider is a buying strategy as when secirities are bought has just to do as much in making a profit as to when they are sold (Buy low, Sell high).
Again, I believe every investor needs a speedometer(s). And, don't buy blindly and/or because another says value exist. Do your own due diligence.
Old_Skeet