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To: Investor2 who wrote (5021)	5/17/1998 10:25:00 PM
From: MrGreenJeans	Read Replies (1) \| Respond to of 42834

Investor 2-Clarification <<Re: "1. PE ratios are currently at historic highs on the S&P. Does it make sense to buy the Index or dollar cost average into the index at these levels for a possible 10% advance?" Let me carry your thought one step further: Is it ever worth investing in stocks, if the long term average annual return is only 10%? The idea of a 10% advance being insignificant is yet another sign of how spoiled we investors have become over the last few years. >> I do not want to give the impression that I think historic average returns of 10% are insignificant they are not. My point is that if the upside for the next year is let us say 10% going forward is it worth being fully invested if price earnings ratios on the S&P go from 23-23.5 to 22? 20?18?16?14? anything less than let us say 23xs. A drop from a 23 price earnings ratio to a 20 or 18 price earnings ratio, still an excellent ratio for the S&P, means significant losses in our portfolios. More average price earnings ratios of 16 or 14 will spell even greater losses of profits in our portfolios.