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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
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Author: Baybrooke ✸  😊 😞
Number: of 15059 
Subject: Re: Reversion to .....mean? S&P?
Date: 04/22/2025 12:08 AM
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Buying on a dip DOES make sense...but only if the thing you're buying offers a decent return starting from its new price. i.e., if it's now undervalued, or at most fairly valued. You just have to know what you're buying, and what its value is, or at least *some* kind of crude guess. The logic that "it just dipped in price" isn't enough.

Speaking of some kind of a crude guess, I estimate that from current price SP500 will at least keep up with inflation over a 10 year time frame.

2024 sales for the index = 2004.54. Sales have reliably increased at 1.5% real over the past several decades. So 10 years from now, sales will be 2326.35 real. Slapping a middle of the road 10% profit margin and 18 multiple gives you 4187.43 real as the index price. Starting from today's price of 5158.20, that's -2.06% annual price return. Adding the 2% dividend gives you a 0% real total return. Not a bad outcome if you are already rich and all you want to do is stay rich, i.e., keep up with inflation.
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