Why a Stock Market Crash Could Make You Richer
The Shiller PE Ratio -- a valuation metric that measures the price of the S&P 500 against cyclically adjusted earnings from the previous 10 years -- currently sits at 39, the second-highest multiple in history. When was the Shiller PE ratio higher? Right before the dot-com bubble burst in 1999.
Of course, there is no single metric (or person) that can predict a stock market crash, at least not consistently. But no one can deny that the S&P 500 currently trades at a high valuation compared to its historical average. More to the point, the next market crash is always a question of when, not if. For that reason, every investor needs to learn how to navigate a downturn.
Here's the good news: the stock market has fallen many times before, and each of those events has ended with the market hitting new highs. That means downturns are often great buying opportunities, and if you have a game plan, you're more likely to act logically when the next market crash occurs.
Source Fool.com
