Stock Market Analysis : Underpriced market vs Fairly priced market vs Overpriced market
Think before you Leap !
This is certainly the best time to invest in market. The problem, however, is that most of us would have exhausted all our money when the market was at peak. By the time market crashes, most of the investors would have lost a good portion of their investment. This is precisely to avoid such situation, asset allocation makes sense.
Underpriced market: PE < 14
Usually a PE of less than 14 is taken as a sign of underpriced market. In an underpriced market, investors can invest 75% of the money in equity and equity oriented mutual funds and 25% in bonds and conservative mutual funds. Since the stock market is down, many good stocks will be available at very attractive price.
