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Tags: Motley Fool | Housel | stock market | correction

Motley Fool's Housel: Be Prepared for Stock-Market Correction

By    |   Sunday, 21 September 2014 06:43 PM

The S&P 500 Index has tripled over the last five years, and both it and the Dow Jones Industrial Average hit record highs yet again Friday.

But don't get carried away, a correction at some point is inevitable, says Morgan Housel, a columnist for the Motley Fool.

The Dow has gone more than 700 trading days without a correction, the fourth-longest streak since 1929, according to S&P Capital IQ.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

"Nobody knows when the market might turn," Housel writes in The Wall Street Journal. In the 1990s the Dow went more than twice this long without falling 10 percent.

"But the longer we go without a stock-market pullback, the harder it will be for investors to handle when it inevitably occurs," he says. "A stable market breeds complacency. Complacency breeds bad investing behavior. Bad investing behavior breeds regret."

Housel's advice: don't get carried away by emotions in your buy and sell decisions.

Star real estate investor Sam Zell, chairman of Equity Group Investments, warns that stocks have probably risen too far.

"The stock market is at an all-time high, but economic activity is not at an all-time high," he told CNBC. "People have no place else to put their money, and the stock market is getting more than its share. It's very likely that something has to give here."

The trailing price-earnings ratio for the S&P 500 totaled 19.36 Friday, up from 18.56 a year earlier, according to Birinyi Associates.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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Finance
The S&P 500 Index has tripled over the last five years, and both it and the Dow Jones Industrial Average hit record highs yet again Friday.
Motley Fool, Housel, stock market, correction
261
2014-43-21
Sunday, 21 September 2014 06:43 PM
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