The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Le Barbu on December 10, 2021, 12:20:16 PM
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As a Canadian, I use to have the following asset allocation:
30% VCN (Canadian index)
30% VTI
10% VBR
30% VXUS
Lately, the VTI p/e is still almost 24 but the other ETF are back in the 14-16 range. Also, I am getting older and my financial situation is pretty good now. I consider shifting to:
5% VSB (Canadian short bonds)
25% VCN
25% VTI
15% VBR
30% VXUS
This will lower my exposure to the low diversified Canadian stock market and lower my average p/e in the US market. Small cap value are cheap compared to the bigger corps
What do you think?
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Looking solely at the P/E at this point in time can be a problem, because last year, or the last trailing 12 months, have been so atypical. Forward P/E's are, of course, made up--based on estimates; but while they are usually optimistic, they might be closer to a normal business cycle than than last year was.
There is still something to be said about your argument on a relative basis. It's not like Covid missed some region or market segment. Just understand that anything looking back only 12 months is looking at quite an anomalous time, which impacts its usefulness. So, if you looked at forward p/e's or longer-term p/e's (e.g. Schiller) and they said something different, then you might rethink your actions.