In this episode, Mark talks about Trailing PE (the PE ratio the stock trades at based on the last year) and Forward PE (price to earnings ratio for the next fiscal year of a company). High multiple stocks eventually someday do go down - you just don’t know when (for example: Amazon). He also discusses Closet indexing (a type of money manager that doesn’t manage an actual index fund. The fund ends up owning so many positions it becomes a closet index) and Diversification (results in an averaging affect. Additional investments reduce returns and the chances of out performing a benchmark). He advises investors to not be a short term investor when it comes to a Growth oriented investment.
December 6, 2016