The investor who is willing to do a little thinking, along with the investing work that follows, has many ideas to check. For instance, there has been a strong inverse relationship between the last few years’ average price/earnings ratio of the stock indexes like the S&P 500 and the total return on the index over the next few years. Put simply, a high P/E ratio suggests stocks are overpriced and are likely to underperform, whereas a low P/E indicates the opposite. An investor who is diversified among asset classes might exploit this by decreasing his allocation to stocks when P/Es have been
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