Indicators for Assessing the Market’s Risks and Rewards


Though I don’t put much weight on forecasts and I invest for the long term, I do keep an eye on how attractive or risky the market appears to be. Partially, I do this because I work in the investment industry and am periodically asked what I think about the market. But I also do this because I think an awareness of the current market conditions can help with portfolio decisions.

None of this is about market timing. Market timing involves buying and selling securities based on what you think will happen. While I have spoken to some investors who say they avoided the last bear market, far more have told me that they have missed out on part or most of the current bull market out of fear about what they thought might happen. I don’t think investors, individual or institutional, should use market timing strategies, and the reason is simple: The future typically unfolds in ways we do not expect it to.

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