No. of Recommendations: 0
I just read the book with the above title by Ben Stein and Phil DeMuth.

They make a very strong case. I already knew that throughout the stock market's history the P/E ratio averages around 15, and if you had bought the market (index fund) when it is lower than 15, you made much more money over the next 10+ years than if you bought the market when it was higher than 15.

Any way... they show that it is EASY to time the market.

Even with just the price...

Take the 15 year moving average of the PRICE of the S&P 500... Then compare two investors (all dollars are in 2001 inflation adjusted dollars)

#1 invests $1000 every year from 1902 to 2001
#2 invests $2000 every year the price of the S&P 500 is below it's 15 year moving average.

#1 invests $100,000 which grows to $1,051,008 (951% total return)
#2 invests $80,000 (only 40 years matched) which grows to $1,226,213 (1443% total return)

They then do the same thing with just the last 25 years (1977-2001). #1 puts in $100 a month every month, #2 puts $200 a month but only when the S&P 500 price is lower than the 15 year moving average (so he pretty much stops by 1985)

#1 puts in $30,000 total - it grows to $75,000 (150%)
#2 puts in $20,400 total - it grows to $78,000 (283%).

They go on to do the same comparisions using the P/E ratio, Dividend Yield, Price-to-Book, Price-to-Cash, Price-to-Sales.

Very interesting stuff... In all cases, just buying when lower (higher in the case of dividend yields) than the 15 year moving average ends up making you a lot more money.

My plan is to combine investor #1 and #2.

To match the example above, I'll invest $100 a month every month like Investor #1, but when two or three of the indicators mentioned in the book give the green light, I'll up my investment to $200 a month.

Any of you read this book? What are your thoughts?
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.