My 2018 Investment Perspective

I’ve always been amazed at how quickly investors forget what it feels like to lose money.

One of my favorite economists, whom will remain unnamed, is a constant stock market cheerleader. He’s never met a market he hasn’t liked. I love his optimism and I too believe, like he does, that Trump’s tax cuts will keep us chugging along for some time.

But that doesn’t mean stocks will always rise like the sun.

Where I take issue with this perma-bull economist is his call that the bull market in bonds is over. He also says that bonds, more than stocks, are in bubble territory. He takes the inverse of the 10-year Treasury yield of 2.5% which is a price-earnings yield of 40, and then compares it to stocks.

But how much comfort do earnings yields offer when stocks crash? Playing that game, the S&P 500 P/E of 26 has an earnings yield of 3.8% or if we take Amazon with its P/E of 314, its earnings yield is 0.3%. Not exactly a bargain.

The key to your investment success, and survival, is to remember what it feels like to own bonds (like Vanguard GNMA) when stocks crash, and to never forget what it feels like to keep more of your money while others are losing it.

Originally posted on Yoursurvivalguy.com.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.

E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.