A few quick question to all the experts here:
Best way to avoid a stock market bubble is to buy counters according to its historical parameters of that particular industries? [Y/N] (I know best way is just don't buy but what if buy liao leh?)
I was reading A Random Walk Down Wall Street (singnet down so nothing to do); while the book talk a lot of the historical bubbles in the past but no exact/proven ways to avoid them was mentioned.
My thoughts:
I was thinking if based on their current parameters like p/e or dividend yield; the bubble cannot be detected as the industries. As a whole, counters in the same sector will show similar trends. Example in dot-com bubble, the p/e of anything associated is in the hundreds. Lazy analysts can always point at another counter in the same sector and said it is the norm to be in that range. So buying according to historical parameters (~10 years or so) seemed safer but the downside is possibly missing some of the 'multi-baggers'.
Thing is it is never known as a bubble until it has popped.
One of the ways to manage this risk is to construct the portfolio using (hopefully) non-correlated assets so that it can cushion the damage during the subsequent stampede. Or have warchest reserves on standby to gradually average down.
Another observation made, at least during 2016, are all the market naysayers about the next imminent crash. Especially at certain periods like the China meltdown cum commodities rout, Brexit, Trump etc. But look at where the markets are at now
