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Beware of stock market's false bargains

Mar 31, 2022

Redacción Mapfre

Redacción Mapfre

One of Warren Buffett’s most famous quotes (echoing Benjamin Graham) is “Price is what you pay; value is what you get.” For most people it’s difficult to separate a company’s stock’s price from what it is worth. Investors often forget that a stock price simply represents the price that someone is currently willing to pay to purchase shares in a company—and many times, that price is not a reflection of a company’s underlying value.

Jonathan Boyar, CEO at Boyar Value Group, states in an article in Forbes that this concept “is especially important now as there are many companies that have recently lost 30% to 70% of their value.”

This significant “price reduction” does not automatically spell a bargain, as companies whose share prices have collapsed could have just been grossly overvalued to begin with. What’s more, they may still be overvalued. To be successful, Boyar argues that investors “should focus on what a company is worth and pay less attention to short-term share price movements.”

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How to invest with the stock market at maximums?

How to invest with the stock market at maximums?

We are facing a high price scenario, in which questions for investors arise: Should one enter a market that is already “expensive,” or wait? Should you hold your investments, or is it time to sell? MAPFRE experts explain that being in a moment when stock markets are at record highs should not deter investment if we have a long-term outlook—the most suitable for retail investors—and good diversification.

Fed Highlights “High Prices” in Equities: Are We Facing a Bubble?

Fed Highlights “High Prices” in Equities: Are We Facing a Bubble?

The U.S. Federal Reserve has dominated much of the economic and financial discussion in recent weeks, largely due to the debate over possible rate cuts, which were confirmed last week. On Tuesday, Chair Jerome Powell again drew attention by referring in a speech to the “fairly high” prices in U.S. equities. With Wall Street at historic highs, the question arises whether we are dealing with an equity bubble.

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