Market Valuation

Once a month, I take the time to examine the overall value of the market. It’s important to avoid making large purchasing decisions when the overall market has been bid up to overvalued levels.

As I have mentioned previously, Ben Stein and Phil DeMuth’s website provides a nice set of graphs indicating the market’s valuation relative to 15-year moving averages. A new source of overall market valuation information is Morningstar’s Market Valuation Graph. The graph shows the ratio of price to Morningstar’s estimate of fair value for the median stock in Morningstar’s coverage universe of over 1,500 stocks.

Given the latest dip in the market, it appears the market is fairly close to fair value at this point. Any further corrections could lead to buying opportunities.

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