30 Days to Becoming a Better Investor – Day 6

I hope you got a chance this weekend to catch up on your reading of the material presented in the first 5 days of the 30 Days to Becoming a Better Investor community event.

Tonight, I have another great article from Shai Dardashti. Shai takes a look at market valuations in his post entitled, The Market Index is Overvalued? So what!.

Shai doesn’t worry about whether the overall market is overvalued, but instead he focuses on individual companies. He also recommends that you create a shopping list of companies that you would like to own. That way when the market offers up a “limited-time-only clearance sale” you are ready to act. I couldn’t agree with Shai more on this point.

However, I do monitor the overall value of the market for two key purposes. First, I track the overall value of the market to determine whether I’m likely to find lots of bargain stocks or whether I’m going to have to work really hard to find a hidden gem of an opportunity. When the market is really overvalued, I take that opportunity to ease up on my research efforts and instead focus on my current holding to determine if I need to sell any of them. Second, I monitor the overall market value of the major indexes to help me make decisions on my retirement account contributions, which are limited to index fund options. If you are in a similar situation with your employee retirement account or utilize index funds in another account, I recommend that you look at the work of Ben Stein and Phil DeMuth at Yes, You Can Time the Market.

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