Thus, a change in the market’s mood can reduce our solid 9.3 percent return to a paltry 4.1 percent or boost it to a wonderful 13.6 percent. You can buy an excellent company that kicks out earnings and dividends like clockwork, but the negative effects of a sharp decline in the stock’s valuation can wipe out even the most robust investment return—and a P/E decline from 20 to 15 is hardly a worst-case scenario.
