Before the article, check out the latest on my podcast, Personal Finance for Long-Term Investors: On Apple Podcasts On Spotify On YouTube Now, here’s today’s article: We’ve all been here before. Not only is the stock market at an all-time high, but valuations are also creeping higher. In other words: Yes, S&P 500 index is at ~6500, and that’s a bigger number than ever before. But if our companies are earning more money than ever, then we should be at an all-time high, right? That’s why valuation matters. It’s not just the price (~6500) that matters, but also the companies’ earnings. One simple valuation metric is “price to earnings,” or “P/E.” It’s a fraction dividing the market’s total price by the market’s total earnings.  And when we look at THAT metric… We’re also creeping uncomfortably higher. Most of the market’s history shows P/E ratios in the range of 10 to 20. And large P/E spikes tend to be followed by large P/E crashes. When the P/E crashes, usually it’s the price (a.k.a. our portfolio values) that takes the brunt of the pain. Ouch. What does this mean for us?  Bonus reading – the original “Should You Invest at All-Time Highs?” What Should We Think About “High P/E?” When the P/E ratio is high, it means investors on the whole (including us) are valuing stocks right now based on big future hopes.  The current P/E ratio of 30 means we’re buying stocks at a price that is 30x higher than one year of earnings. Or, if earnings never change, it would take these companies 30 years to pay us back for our investment. Baked into high P/E ratios is the hope for future growth. It means companies need to overachieve to make up for today’s higher-than-typical price. The earnings must grow (and quickly) to turn the 30-year expectation I just outlined into something shorter. Lemons Imagine my lemonade stand earned $100 this past summer.  Investor A says, “I’ll buy your stand. But lemonade is a dying business. Maybe I can repeat your earnings for one more summer, but soon after I’ll get out-competed. I’ll buy your stand for $100, make my money back next summer, and after that I might turn some profit. My offer to buy you is $100. But not a cent more.” That’s a price ($100) to earnings (also $100) ratio of 1.  But then investor B comes along and says, “Lemonade is a gold mine! We can expand your operations by 10x and carry forward for the next 50+ years, making $1000’s every summer! This year was just a proof of concept. This company is easily worth $10000 – and it’ll make me a millionaire in the long run.” That’s a price ($10,000) to earnings ($100) of 100. Investor A has a low valuation.  Investor B has a high valuation.  Some would call investor A a pessimist.  Others would call investor B an optimist.  Both adjectives can

Do you know what the most valuable asset you own is? When asked this question, most people will answer with their house, savings account, or their investment portfolio. In reality, the greatest asset you own is yourself. That’s right, you are your greatest asset, and because of this, you need to invest in yourself. When you take the time to invest in yourself, your entire life changes. You have more opportunities in life, experience more […]

Robo-Advisor vs. Target Date Fund: A Comprehensive Guide Do you want a set-it-and-forget-it investment strategy? Are you seeking the greatest return for your risk level? If you’re saving for a future goal, such as retirement or paying for college a decade in the future, you want a sensible investment strategy that will deliver the funds, when you need them. Choosing the right investment strategy can feel like navigating a tumultuous sea. Two popular options for both newbies and experienced investors are robo-advisors and target-date funds. Both simplify investing, they have distinct similarities, differences, pros and cons. Despite managing the majority of my own investments, I use a robo-advisor for one of my retirement accounts. Understanding the nuances of robo-advisors vs target date funds, including personalization, diversification and fees, is crucial to making an informed decision that aligns with your financial goals and risk comfort level. This comprehensive guide delves into the intricacies of robo-advisors and target-date funds, highlighting key features, advantages, disadvantages, and ultimately helping you determine which path might be the better fit for your investment goals. One or our favorite investment platforms, M1 combines both target date fund options and expert portfolios with rebalancing (I have an account with M1): Understanding the Basics: Robo-Advisors Robo-advisors are digital platforms that provide automated investment management services. They utilize sophisticated algorithms and modern portfolio theory to build and manage investment portfolios based on your financial goals, risk tolerance, and time horizon. Within the robo-advisor category, there are many distinctions with some robo’s providing financial advisors and others offering advanced customization options. Fees range from zero on up to more than 0.70% of assets under management. [embed]https://youtube.com/watch?v=Cz97_Hunc0Y&si=PW4ErV-AIhi1paTN[/embed] How Robo-Advisors Work: Most robo-advisors have a similar set up. Onboarding and Profiling: You typically start by answering a questionnaire about your financial situation, investment goals (e.g., retirement, down payment, general wealth building), time horizon (how long you plan to invest), and risk tolerance (your comfort level with potential market fluctuations). Portfolio Construction: Based on your responses, the robo-advisor constructs a diversified portfolio, generally comprised of low-cost exchange-traded funds (ETFs) that invest in a mix of stocks and bonds. The specific asset allocation (the percentage of your portfolio allocated to different asset classes) is tailored to your risk profile. For instance, a younger investor with a long time horizon and higher risk tolerance might have a portfolio with a greater stock allocation, which historically offers higher growth potential but also carries greater price volatility. Conversely, an older investor nearing retirement might prefer a more conservative portfolio with a greater allocation to bonds, which tend to be less volatile. Automated Management: Once your portfolio is set up, the robo-advisor takes over the day-to-day management. This includes: Rebalancing: Over time, your initial asset allocation can drift due to the different performance of the underlying investments. Robo-advisors automatically rebalance your portfolio to bring it back in line with your target allocation, ensuring your risk profile remains consistent. For example, if stocks

Portfolio management Biting the bullet This post will be of interest to investors who are either retired or thinking about their retirement. Most countries tax regimes have two different kinds of investment account. The first is a normal taxable account and the second is a tax free or tax advantaged account. Canada has a variety of tax advantaged accounts and no doubt the rules of the game are different in different countries. The tax advantaged […]

Discover the best UK dividend stocks in 2025. Learn key metrics, recent increases & cuts, and why UK shares are a tax-efficient choice for international dividend investors. The post UK Dividend Stocks 2025 | Guide to Income, Growth & Tax Advantages appeared first on European Dividend Growth Investor.

This is what dividend investing is all about!  Investing in dividend stocks allows YOU to earn dividend income, the best passive income stream!  Bias, you better believe it. Time to dive into Lanny’s June 2025 dividend income results!  Were records set?  Almost to financial freedom?  One day and one month at a time! (adsbygoogle = window.adsbygoogle || []).push({}); Dividend Income Dividend Income is the fruit from the labor of investing your money in the stock […]