The Magnificent 7 stocks are driving a lot of the run-up in US stock valuations, accounting for something like 30% of the S&P 500's returns. Instead of sitting on the sidelines awaiting a correction, have you considered value stocks instead? True, they haven't returned much of anything for quite a long time, but perhaps that's a decent reason to consider them. The P/E for Vanguard's US Growth Index Fund is 35.1. Their Value Index Fund P/E is 18.6. Also worth considering is a Total International Stock Fund. This is kind of a value fund as well given the low P/E of 1.4 in Vanguard's offering. A single country can tank for a long time as you point out, but diversifying across lots of countries with still a good amount of domestic stocks split between value and some growth is worth a look. Lastly, in order to reap the reward of market timing, you have be right twice: once when you pull out of the market and again when you buy back in. You should have well-defined criteria for when to buy back in. This is no easy task. I didn't develop good re-buy guidelines when I pulled out of stocks in 1997 anticipating a major drop. Right first + wrong second = still wrong overall. Lesson learned.
Very nice article, Jesse. Interesting how many of us engineers naturally gravitate toward personal finance / investing. I haven't made a career switch as you have, but I read so much in this area that I wonder why I don't! Also, regarding Radiohead: what a phenomenally talented and creative band, and a rarity among bands in that they get better and better upon repeated listening. OK Computer, In Rainbows, Kid A - classics all.
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That should say 14.9 for the P/E, not 1.4.
Post: Waiting It Out
Link to comment from May 24, 2024
The Magnificent 7 stocks are driving a lot of the run-up in US stock valuations, accounting for something like 30% of the S&P 500's returns. Instead of sitting on the sidelines awaiting a correction, have you considered value stocks instead? True, they haven't returned much of anything for quite a long time, but perhaps that's a decent reason to consider them. The P/E for Vanguard's US Growth Index Fund is 35.1. Their Value Index Fund P/E is 18.6. Also worth considering is a Total International Stock Fund. This is kind of a value fund as well given the low P/E of 1.4 in Vanguard's offering. A single country can tank for a long time as you point out, but diversifying across lots of countries with still a good amount of domestic stocks split between value and some growth is worth a look. Lastly, in order to reap the reward of market timing, you have be right twice: once when you pull out of the market and again when you buy back in. You should have well-defined criteria for when to buy back in. This is no easy task. I didn't develop good re-buy guidelines when I pulled out of stocks in 1997 anticipating a major drop. Right first + wrong second = still wrong overall. Lesson learned.
Post: Waiting It Out
Link to comment from May 24, 2024
Very nice article, Jesse. Interesting how many of us engineers naturally gravitate toward personal finance / investing. I haven't made a career switch as you have, but I read so much in this area that I wonder why I don't! Also, regarding Radiohead: what a phenomenally talented and creative band, and a rarity among bands in that they get better and better upon repeated listening. OK Computer, In Rainbows, Kid A - classics all.
Post: Happy Conclusion
Link to comment from May 14, 2024