In investing, everything starts with opportunity cost. I am constantly comparing my best idea against the next best alternative.
Right now, that comparison is getting harder. The S&P 500 is trading around 25x forward earnings, well above its historical average. Great companies at a fair price are almost nowhere to be found.
When the market gets expensive, I continue to study companies and get my watchlist ready. I demand a high margin of safety, so these stocks might never reach my price. But if they do, I would consider adding them.
