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