How To Tell When Stocks Go On Sale

Been going through the old articles for Mr. Money Mustache, and found this little gem I wanted to post as a reminder.

How to tell when the stock market is on sale.

The whole premise is that the average weighted P/E ratio of ALL S&P 500 companies has been 16.4. You use this number as a buy signal for when an S&P 500 index or even individual stocks fall below this price. You can possibly use it as a sale signal when stocks go above this ratio.

Granted this is one single number to use in a much more thorough stock analysis, but its certainly one of the better ones to use.

As a side note, I started following Mr. Money Mustache after he was mentioned on ERE (Early Retirement Extreme). I would suggest following both of their blogs and forums if you are interested in being your own best financial adviser.

1 thought on “How To Tell When Stocks Go On Sale”

  1. Pingback: The Rule of Opposites | Jeremy M. Day

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