Stocks Pricey and Risky -- But Shouldn't Be Avoided, Shiller Says

Yale Economist Robert Shiller says he thinks stocks “look highly priced, but not super highly priced”. In an interview with Consuelo Mack on WealthTrack, Shiller says the market’s 10-year price/earnings ratio (which averages earnings over the past ten years) has historically averaged about 15; lately, it’s been around 20. But Shiller says it’s “not too disquieting” a number, and that, given the long-term success of stocks, investors shouldn’t avoid them. “I think that one might make a substantial investment in the stock market now — but with full knowledge [that] it shouldn’t be everything, because it is risky,” he says. He adds that there’s a “real chance of a substantial drop in stock prices — I’m talking big,” given the economic situation at home and abroad and — importantly — the impact they are having on people’s psyches.