They looked at the allocation between stocks, bonds and cash. They found that over 95 percent of the funds’ returns came from their asset allocation.
Going parabolic and other lies
In such an environment, many investors actually consider investments they are making are low risk when, in fact, they are higher risk.
I am not attuned to this market environment, and I don’t want to spoil a decent record by trying to play a game I don’t understand just so I can go out a hero.
The cash in the portfolio may be enough to take advantage of the opportunity. Or it may not be enough. It doesn’t matter. The investor is in the delicious position of comparing the new opportunity with all other holdings in the portfolio.
Wrap up on the drawbacks of CAPE. A fair level for price earnings ratios has changed over the years.
Investors are reading CAPE all wrong.
A CAPE ratio of 26.91 does not prove the stock market is overpriced. The stock market today may be overpriced or underpriced. CAPE using a historic average as a benchmark just doesn’t tell us one way or another
The S&P 500 appears to cross through the two standard deviation channel in mid-1996.