Two Interesting Ones From the WebT
Robert Shiller Nobel Prize Winner in Economic in the NYT
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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.
But
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.
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