Are stocks on "sale" right now?

[joenorm]

Ive been reading this forum and forums like it A LOT lately, trying to absorb as much as I can.

So nobody can time the market, understood. That is agreed on by everyone who has considered it enough.

But at the same time, people say to buy when stocks go "on sale."

But since we already have accepted that we cannot time the market and that we have no idea where we are relative to where the market will go, how do we know when stocks are on sale?

Is buying "on Sale" simply buying at any dip in the market? Or is there some metric for it? It seems like right now is that time, even though of course we have no idea where it is headed from here.

I know this is a question that has no definite answer, still curious how smart people are making their judgement calls.

[chasesfish]

For what its worth, one of the historical indicators a lot of people quote is the Schiller PE Ratio.

http://www.multpl.com/shiller-pe/

The theory is companies are worth an underlying multiple of their earnings.

The ratio has been more challenging to benchmark since 1995, we've had a lot of technology companies that are public without any earnings and we're still working through some huge negative earnings/overstated losses from 2009-2010 in the banking sector.  (the banking sector stuff is a much longer explanation)

There's also a higher percentage of the population invested today than through the 70s/80s with the prevalence of technology and in the depths of 2009 we barely got to the 100 year median/mean.

I think come 2020/2021 this will be a good measure again.

Other than that, its entirely up to you:

-  Lots of people said tech stocks were on sale in 2001 and got beat over the head for two more years
- Alternatively, in 1987 a lot of people experienced a 27% drop, sold out, and didn't participate in the huge bull market that ensued for the next four years.

"The four most expensive words in the English language are "this time it’s different." " - John Templeton

[I'm a red panda]

Buying now because they are "on sale" is market timing.

Buy now because you have a plan to buy at regular intervals, be it weekly, biweekly, or monthly. Have an investment plan and stick to it.

If you wait to buy at dips, what is your cash doing for you in the meantime?

[DreamFIRE]

I've seen quite a few comments on this forum about stocks being on sale, but I always consider the market to be right where it should be.

[frugledoc]

They are on sale compared to the last few months, but may not be on sale compared to future prices.

All you can say is that they are much cheaper to buy now. 

Psychologically, it feels much better buying when you know you are not buying at "THE TOP".

[Travis]

Holding onto cash in hopes of a "sale" is market timing; however, stating that stocks are on sale is also a statement of reassurance that this is a normal part of the game and to stay in it rather than pulling out.  MarketWatch has been saying "the end of the world is here" for the last month, but you can just reply "no it's not, stocks are simply on sale."

[Eric]

On Sale is a mental trick only.  It's a way to convince yourself to keep buying while the market is dropping 20% in 10 weeks is a good idea.  At no point was On Sale meant to imply that you should only buy then.

[Cabaka]

Buying now because they are "on sale" is market timing.

Buy now because you have a plan to buy at regular intervals, be it weekly, biweekly, or monthly. Have an investment plan and stick to it.

If you wait to buy at dips, what is your cash doing for you in the meantime?

second. buying now because they are on sale is "market timing".

you need an overall strategy, buy and hold, % stocks/%bonds/%cash, moving average. read some portfoilio managers that have been around at least 10 years. I repositioned from long to short when the 50 crossed the 200 which is not market timing; it's following a strategy. however taking profits at 20% down on the mkt on that short was mkt timing on which I freely admit, no one had any idea it would drop that far, that fast; it was just more likely that the best way to make money would be short once the 50 crossed and 20% seemed reasonable. if it drops another 30%, i'm miss being short thru that but I won't be losing money being long.
will go long again when the 50 crosses the 200 to the upside; I have no idea when that will be; but the time doesn't matter to me, could be 3 months or 3 years; i'm only interested in capital preservation.

[Steeze]

If you consider what the price of a stock or index will be in 10, 20, 30 years when you are actually selling the share you are buying, stocks are basically always on sale. Even at the Top, still on sale. Btw, Top is in.