If You're In It for the Long Haul
Earnings yield is perhaps one of the most widely used metrics when determining overall market valuation. That's because it provides an easy and revealing way to look at the current valuation of stocks -- and to compare them to bonds, which compete with stocks for investors' capital.
So investors should pay attention to stock and bond yields, because the relationship between the two can be particularly revealing. The higher the yield on stocks is, the more attractive they are -- or, to put another way, the more undervalued they are. So if the earnings yield on stocks is higher than yields on bonds, stocks are considered more desirable (i.e., more undervalued) vs. bonds -- and vice versa....458 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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