some wise words by F958B

There was a poster on Motley Fool called F958B, whom I liked to read. He had many words of wisdom, and his advice was:

An investor doesn’t *need* to do an awful lot *right* – they just need to control their desire for crowd behaviour, greed, knife-catching, “farm bets” and trying to score “home runs”.

In 2011 he wrote a comment on the expected returns from markets (http://is.gd/hnYFTP):

There is a good correlation between the P/E ratio at the time of purchase and the subsequent long-term returns. When P/E ratio at the start or a ten-year period is sorted by Quintile, we get something like:
P/E average: 8x . 10y real return: 11%
P/E average: 11x . 10y real return: 9%
P/E average: 14x . 10y real return: 7%
P/E average: 18x . 10y real return: 5%
P/E average: 24x . 10y real return: 3%

Basically, the 10y real return is roughly equal (but slightly below) the earnings yield at the start of the period.

Edit 24-Dec-2014: typos and formatting fixes

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About mcturra2000

Computer programmer living in Scotland.
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