Jack Bogle Told Us This Was The Most Important Chart Of The Year
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Business Insider reached out to the smartest people in finance and asked them for what they considered to be the most important chart of the year.
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Jack Bogle, pioneer of the index fund, sent us this classic.
It's of the Dow Jones Industrial Average's price-book ratio, a measure that popularized by Ben Graham, the godfather of valuation.
Book value is the difference between a company's assets and liabilities. The lower the price-book value, the cheaper.
However, this does not mean you should only invest with the expectation that this measure will immediately revert to its mean.
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In fact, this measure (and many other valuation measures) will drift from long-term averages for long periods of time. It's further proof that markets will be irrational longer than you can stay solvent.
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