Monday, August 18, 2014
Two Interesting Articles from the NYT
Two Interesting Ones From the WebT
Robert Shiller Nobel Prize Winner in Economic in the NYT
AUG. 16, 2014
The United States stock market looks very expensive right now. The CAPE ratio, a stock-price measure I helped develop — is hovering at a worrisome level....
But Does It Really Matter How You Invest a Lump Sum
This NYT article argues no
AUG. 16, 2014
You’ve got some big decisions ahead if you’re lucky enough to have some cash to invest. Say you’ve decided to put it into the stock market. Should you plunge in immediately, investing your entire stash, or start slowly and move your money into long-term holdings very gradually?
Academics and investment practitioners have studied this question extensively. And based on statistical analysis of past performance — which, of course, is no guarantee of future returns — there is a very simple answer.
“If you’re going to make a long-term investment in stocks, you’re generally better off putting all of your money into a diversified portfolio as soon as you can,” said Paul Bosse, a principal in the investment strategy group at Vanguard. That’s because the long-term direction of the stock market has been upward, and, most of the time, the sooner you are in the market the better off you’re likely to be.
Of course, the market doesn’t always rise. And if you can avoid investing at a market peak, you are better off. But that significant
caveat aside, delaying investment has usually meant missing out on market gains.
None of which is to say that riding out those big losses would have been pleasant or that the environment has been ideal. And the markets may well become more volatile. After the gains of recent years, stock and bond markets may be overvalued — as Robert J. Shiller suggests in his Economic View column this week — and returns over the next decade may be less than those of the past. There is also no assurance that the patterns of the past will prevail again.