Should You Buy Expensive Stocks

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Should You Buy Expensive Stocks

Why You Should Buy Stocks Despite High Valuations

The S&P 500 and all the other US indices are trading at record high valuations. So, it's only normal for investors to feel fearful and wonder if they really should be buying stocks or not.

But, experts believe that it is not the right idea to stop buying stocks because of high valuations. Cost averaging and value investing are two strategies that are used by a majority of investors.

So, we will look at both strategies and see how they can be used to buy stocks despite the high valuations:

Cost Averaging

very popular strategy is cost averaging, which is all about buying shares on a regular basis. For example, an investor can buy $300 worth of shares every month regardless of the price.

key benefit of a cost-averaging strategy is that one doesn't have to worry about the valuations at all. So, even if the stocks are too expensive or cheap, you just keep buying them in a cost-averaging strategy.

Over the long run, investors continue to average out their share buying price. The idea behind this strategy is that the long-term trend in stock markets is always bullish.

Value Investing

Another popular strategy is called Value Investing, which means one needs to look at valuations. But once again, one can focus on individual stocks and not the entire US index.

For example, the S&P 500 index is at record highs, but there are many individual stocks with low valuations. So, the smart strategy can be to focus on those stocks with low P/E.

Of course, the AI-based stocks will mostly have high valuations, and you will need to pay a premium to get them. But there are also many stocks in the S&P 500 that are actually very cheap right now.

So, the bottom line is that high valuations shouldn't be the sole reason to stop buying stocks. By focusing on strategies like value investing and cost averaging, you can still buy the right stocks!

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