What index stocks are on undervalued now? What site do people use to determine this?

[fortfun]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

[FiveK]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

1. & 2. No way to know.
3. You could look at S&P 500 PE Ratio and the "See also" links on that page.

But do see also What if You Only Invested at Market Peaks?

[UpperNwGuy]

Seems to me that you want to do some market timing.

[RickBoglehead]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

Where do you gain such knowledge that you now understand these things?

[fortfun]

Seems to me that you want to do some market timing.

I wouldn't say that. For example, it's really more in line with Vanguard having a higher percentage (than many TDFs) in total international funds in their target date funds. Would you say Vanguard is market timing?

[fortfun]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

Where do you gain such knowledge that you now understand these things?

Vanguard. For example, Vanguard has a higher percentage (than many TDFs) in total international funds in their target date funds. I've read that they expect their values to increase at a higher rate, than others, in the future.

[RickBoglehead]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

Where do you gain such knowledge that you now understand these things?

Vanguard. For example, Vanguard has a higher percentage (than many TDFs) in total international funds in their target date funds. I've read that they expect their values to increase at a higher rate, than others, in the future.

So you are of the belief that Vanguard has increased the percentage of international funds in their target date funds, because they expect the value of international funds to increase more than US-based funds? I think that's not true. I think that Vanguard hasn't changed anything.

In November they say they expect international to beat US over the next decade. That's their expectation. Beliefs, expectations, forecasts. All crystal ball. Ask people who invested in international stocks a decade ago how they did as compared to US stocks.

No one knows what the future brings. No one.

[nedsaid]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

It is generally true. My view is that US Stocks are expensive but not as expensive as people think. Forward P/E's on the US Market based upon estimated earnings is about 15 now. I have seen them as high as 22. A tax cut which helped earnings by US companies and very good operating results have boosted earnings. P/E ratios have actually been falling here in the United States, the market might think these earnings are unsustainable. John Bogle, just before he died put out an opinion that US stocks are expensive and said it might be a good time to cut back.

If you are relatively young, just keep investing and don't look back. If you are near retirement, you might want to think about what Mr. Bogle said. But somehow, I just can't bring myself to believe that forward P/E's of 15 indicate an expensive market. In 1999 and early 2000, forward P/E's got to about 32. Nowhere near that now.

[UpperNwGuy]

Seems to me that you want to do some market timing.

I wouldn't say that. For example, it's really more in line with Vanguard having a higher percentage (than many TDFs) in total international funds in their target date funds. Would you say Vanguard is market timing?

Vanguard has been steadily growing the percentage of international stocks in their target date funds with the apparent goal of reaching market weight. They've never said it has anything to do with valuations.

[nisiprius]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

Have you read the Bogleheads investment philosophy? Take a look at it. You may decide not to follow it, but you should know what it is.

What does it say about how to determine which categories of stocks are overpriced and which are underpriced? What does it say about "mean reversion?"

There is a wide variety of opinions expressed in this forum, but the "Bogleheads' philosophy" is a reasonable statement of core or baseline or mainstream opinion. And it is not the same as the typical opinions you read in the financial press and other forums.

John C. Bogle has said "you rarely, if ever, know something the market does not." Notice he does hedge his opinion by saying "rarely, if ever." Like Bogle, I think the market is efficient enough that I might as well act as if it is. To put it another way, maybe the market is not perfectly efficient, but even if it isn't, I don't know how to exploit that. Nor do I know how to identify the people who do know.

How is it even possible that "US stocks are widely considered overpriced right now?" If almost everybody thinks their prices are too high, then who is it who was willing to bid up their price to that level?

My personal answer is that I hold about 1/5th to 1/4th of my stock allocation in an international stock index fund, and I just keep it in that zone. I don't try to determine what stocks are "on sale," so there are no sites I use to determine this.

[livesoft]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

1. No, I don't think so.
2. Who knows?
3. I use the sentiments expressed on bogleheads.org from many posters. In general, the more "Invest now or wait?" threads that pop up, the more I pay attention.

[drk]

1. Is this generally true? No idea.
2. What other stocks are on sale right now? It seems like Developed ex-US large caps and small caps.
3. What web sites do people use to determine this? None. I just use my asset allocation. With fixed allocations, it tells me relative performance, and I invest accordingly.

[fortfun]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

It is generally true. My view is that US Stocks are expensive but not as expensive as people think. Forward P/E's on the US Market based upon estimated earnings is about 15 now. I have seen them as high as 22. A tax cut which helped earnings by US companies and very good operating results have boosted earnings. P/E ratios have actually been falling here in the United States, the market might think these earnings are unsustainable. John Bogle, just before he died put out an opinion that US stocks are expensive and said it might be a good time to cut back.

If you are relatively young, just keep investing and don't look back. If you are near retirement, you might want to think about what Mr. Bogle said. But somehow, I just can't bring myself to believe that forward P/E's of 15 indicate an expensive market. In 1999 and early 2000, forward P/E's got to about 32. Nowhere near that now.

Thanks Nedsaid. What are PEs?

[mortfree]

I bought VTI around this time last year (March ‘18) and it was in the 140’s.

It is lower now.

[TheTimeLord]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

It is generally true. My view is that US Stocks are expensive but not as expensive as people think. Forward P/E's on the US Market based upon estimated earnings is about 15 now. I have seen them as high as 22. A tax cut which helped earnings by US companies and very good operating results have boosted earnings. P/E ratios have actually been falling here in the United States, the market might think these earnings are unsustainable. John Bogle, just before he died put out an opinion that US stocks are expensive and said it might be a good time to cut back.

If you are relatively young, just keep investing and don't look back. If you are near retirement, you might want to think about what Mr. Bogle said. But somehow, I just can't bring myself to believe that forward P/E's of 15 indicate an expensive market. In 1999 and early 2000, forward P/E's got to about 32. Nowhere near that now.

Thanks Nedsaid. What are PEs?

You have almost 1,500 posts and you are asking what PEs are?

[fortfun]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

It is generally true. My view is that US Stocks are expensive but not as expensive as people think. Forward P/E's on the US Market based upon estimated earnings is about 15 now. I have seen them as high as 22. A tax cut which helped earnings by US companies and very good operating results have boosted earnings. P/E ratios have actually been falling here in the United States, the market might think these earnings are unsustainable. John Bogle, just before he died put out an opinion that US stocks are expensive and said it might be a good time to cut back.

If you are relatively young, just keep investing and don't look back. If you are near retirement, you might want to think about what Mr. Bogle said. But somehow, I just can't bring myself to believe that forward P/E's of 15 indicate an expensive market. In 1999 and early 2000, forward P/E's got to about 32. Nowhere near that now.

Thanks Nedsaid. What are PEs?

You have almost 1,500 posts and you are asking what PEs are?

Okay, just googled it. Price to Earnings ratio. Not one I hear a lot. Sorry, I thought that's what this forum was for...

[pdavi21]

1. Compare your mutual funds based on various factors. PE, PEG, PB, PS, etc.
2. Apply your own premiums
3. Decide which are overpriced
4. If desired, act accordingly

Disclosure: following steps 1-4 would've probably lost you money betting against US for a decade.

[nedsaid]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

It is generally true. My view is that US Stocks are expensive but not as expensive as people think. Forward P/E's on the US Market based upon estimated earnings is about 15 now. I have seen them as high as 22. A tax cut which helped earnings by US companies and very good operating results have boosted earnings. P/E ratios have actually been falling here in the United States, the market might think these earnings are unsustainable. John Bogle, just before he died put out an opinion that US stocks are expensive and said it might be a good time to cut back.

If you are relatively young, just keep investing and don't look back. If you are near retirement, you might want to think about what Mr. Bogle said. But somehow, I just can't bring myself to believe that forward P/E's of 15 indicate an expensive market. In 1999 and early 2000, forward P/E's got to about 32. Nowhere near that now.

Thanks Nedsaid. What are PEs?

Price to Earnings Ratio. That is how many dollars is Wall Street willing to spend to buy a dollar of earnings. In 1999, it was 32. Today, it is 15.

[Ben Mathew]

You can look at the PE ratio on the "Portfolio & Management tab" of Vanguard funds. For example, VTIAX reports a PE ratio of 12, and VTSAX reports 16.1

I like to take the inverse of the PE ratio to get the earnings yield, so it's like an interest rate. So earnings yield of VTIAX is 1/12= 8.3% and of VTSAX is 1/16.1 = 6.2%.

[fortfun]

You can look at the PE ratio on the "Portfolio & Management tab" of Vanguard funds. For example, VTIAX reports a PE ratio of 12, and VTSAX reports 16.1

I like to take the inverse of the PE ratio to get the earnings yield, so it's like an interest rate. So earnings yield of VTIAX is 1/12= 8.3% and of VTSAX is 1/16.1 = 6.2%.

Thank you! This is exactly what I was looking for. Just didn't know how to ask.

[fortfun]

I understand that US stocks are widely considered overpriced right now. I also understand that international and emerging stocks are possibly undervalued right now. i.e. stocks revert to the mean.

1. Is this generally true?
2. What other stocks are on sale right now?
3. What web sites do people use to determine this?

It is generally true. My view is that US Stocks are expensive but not as expensive as people think. Forward P/E's on the US Market based upon estimated earnings is about 15 now. I have seen them as high as 22. A tax cut which helped earnings by US companies and very good operating results have boosted earnings. P/E ratios have actually been falling here in the United States, the market might think these earnings are unsustainable. John Bogle, just before he died put out an opinion that US stocks are expensive and said it might be a good time to cut back.

If you are relatively young, just keep investing and don't look back. If you are near retirement, you might want to think about what Mr. Bogle said. But somehow, I just can't bring myself to believe that forward P/E's of 15 indicate an expensive market. In 1999 and early 2000, forward P/E's got to about 32. Nowhere near that now.

Thanks Nedsaid. What are PEs?

Price to Earnings Ratio. That is how many dollars is Wall Street willing to spend to buy a dollar of earnings. In 1999, it was 32. Today, it is 15.

Thanks Nedsaid. That makes sense.

[columbia]

Thinking that certain market segments are “on sale” would seem to imply having some knowledge that the market as a whole does not possess.

[David Jay]

You can look at the PE ratio on the "Portfolio & Management tab" of Vanguard funds. For example, VTIAX reports a PE ratio of 12, and VTSAX reports 16.1

I like to take the inverse of the PE ratio to get the earnings yield, so it's like an interest rate. So earnings yield of VTIAX is 1/12= 8.3% and of VTSAX is 1/16.1 = 6.2%.

Thank you! This is exactly what I was looking for. Just didn't know how to ask.

You need to be very careful trying to use PE as an index-fund selection tool. Large-cap, for instance will have a higher PE because these are proven companies with lower risk profiles than other segments.

[Thesaints]

You can look at the PE ratio on the "Portfolio & Management tab" of Vanguard funds. For example, VTIAX reports a PE ratio of 12, and VTSAX reports 16.1

I like to take the inverse of the PE ratio to get the earnings yield, so it's like an interest rate. So earnings yield of VTIAX is 1/12= 8.3% and of VTSAX is 1/16.1 = 6.2%.

Yeah. Except that for bonds the “P” is fixed, while for stocks the ratio changes if either “P” or “E” change

[Ben Mathew]

You can look at the PE ratio on the "Portfolio & Management tab" of Vanguard funds. For example, VTIAX reports a PE ratio of 12, and VTSAX reports 16.1

I like to take the inverse of the PE ratio to get the earnings yield, so it's like an interest rate. So earnings yield of VTIAX is 1/12= 8.3% and of VTSAX is 1/16.1 = 6.2%.

Thank you! This is exactly what I was looking for. Just didn't know how to ask.

You need to be very careful trying to use PE as an index-fund selection tool. Large-cap, for instance will have a higher PE because these are proven companies with lower risk profiles than other segments.

Yes, PE ratios is just one of the considerations. PE ratios of a company's stock can be high (i.e. earnings yield low) for good reasons:

1. These are companies whose earnings are expected to grow faster than other companies (growth firms)
2. These are companies who are lower risk than others

But sometimes, it can simply be because

3. These are companies which are underpriced

Historically, it appears that companies with high PE ratios were in fact underpriced. But, of course, that doesn't mean it will be the case going forward.

[Ben Mathew]

You can look at the PE ratio on the "Portfolio & Management tab" of Vanguard funds. For example, VTIAX reports a PE ratio of 12, and VTSAX reports 16.1

I like to take the inverse of the PE ratio to get the earnings yield, so it's like an interest rate. So earnings yield of VTIAX is 1/12= 8.3% and of VTSAX is 1/16.1 = 6.2%.

Yeah. Except that for bonds the “P” is fixed, while for stocks the ratio changes if either “P” or “E” change

Agree that PE ratios for stocks will change if either "P" or "E" changes.

But the "P" in bonds is not fixed. It's the "E" that is fixed because the payouts are known in advance (assuming no default). The price changes to accomodate changes in interest rates.

[Thesaints]

The "E" that you get does not depend on the floating market price, but on the price you paid. Of course, I'm talking of bonds held directly. With bond funds the story is a little more complicated since capital gains and losses caused by the rolling activity also come into play.

[dratkinson]

I believe the "rebalancing" technique will take care of your concerns, as an asset that is currently high will be above its desired AA so you will not rebalance into it.

I rebalance with new money left over after reconciling statements (banking, investing) at the first of each month. After the December drop, January rebound I rebalanced this month into bonds. And probably will continue doing so for the next several months to come.