re: Planet Money Newsletter: Index Fund Questions

i've read several articles about this. The theory has some logic to it but lets take a look at PE (price to earnings) ratios for the top S&P 500 stocks
1. MSFT 27.00
2. AAPL 19.28
3. AMZN 71.23

SP mean is 21.68
These 3 companies make up 10% of the entire index. 21 is historically above average but over the last 30 years it is about average. I think a lot of that has to do with tech stocks trading at much larger multiples of earnings. In otherwords something has to be bringing down the PE ratio of the S&P down to where it is which IMO suggest that currently price discovery isn't an issue. I could see it being an issue 5 years from now, but markets always have a way of correcting. Diversifying investments helps, like property, storage units, preferred stock, bonds, REITS, UIT's, and even commodities.

There are lots of ways to make money.