Somewhat counter-intuitively, history shows that buying the market at a lower relative P.E. is likely to be hazardous to your financial health in the short term. It is important to mention that these results are totally skewed by your time basis. For example the S&P 500 total returns since January 2001 thru Feb 2014 are cumulative 82.08% yet the returns immediately after 2000 were -11.88% year 2001, -22.11% year 2002. Similar phenomenon occurred in year 1973 when the DJIA had a P/E ratio of nearly 7x. That year in 1973 the DJII returned -16.3%, and the following year, 1974, was a negative 27.6%. This though reversed in 1975 with an up year of 38.3%. This is uncannily similar to the S&P year 2003 which too had a stunning reversal of fortune, up 28.69%. The pattern (if you choose to see one) is buy the third year after a trough in valuation PE ratios. It pays to be a value investor but it is not much fun to be early. That brings me to the old Wall St. adage, “What’s the difference in being wrong and being early?” The answer, “None.”