DYI:  Despite the EYC Ratio giving the all clear to dollar cost average into stocks valuations remain very elevated it is best to concentrate your purchases into beat up areas of the market.  Oil/gas/service (drillers, pipeline companies etc.) and/or precious metals mining companies come to mind.  Or downside resistant stocks such as electricity, gas, water utilities or food producers will work as well.  If you are using mutual funds [such as your 401k] an equity income fund emphasizing dividend yield first then possible capital gain second will help protect on the downside and allow better compounding as compared to bonds.  DYI’s favorite as you might have guessed is Vanguard Equity Income Fund Investor Shares (VEIPX) current yield at 3.07%.

Good Hunting

Margin of Safety!

Central Concept of Investment for the purchase of Common Stocks.

"The danger to investors lies in concentrating their purchases in the upper levels of the market..."

Stocks compared to bonds:

Earnings Yield Coverage Ratio - [EYC Ratio]

EYC Ratio = 1/PE10 x 100 x 1.1 / Bond Rate

1.75 plus: Safe for large lump sums & DCA

1.30 plus: Safe for DCA

1.29 or less: Mid-Point - Hold stocks and purchase bonds.

1.00 or less: Sell stocks - Purchase Bonds

Current EYC Ratio: 1.54(rounded)

As of  4-1-20
Updated Monthly

PE10 as report by Multpl.com

Bond Rate is the rate as reported by

Vanguard Long-Term Investment-Grade Fund Investor Shares (VWESX)

DCA is Dollar Cost Averaging.
Lump Sum any amount greater than yearly salary.

PE10  ..........24.40
Bond Rate...2.93%

Over a ten-year period the typical excess of stock earnings power over bond interest may aggregate 4/3 of the price paid. This figure is sufficient to provide a very real margin of safety--which, under favorable conditions, will prevent or minimize a loss......If the purchases are made at the average level of the market over a span of years, the prices paid should carry with them assurance of an adequate margin of safety.  The danger to investors lies in concentrating their purchases in the upper levels of the market.....

Common Sense Investing:
The Papers of Benjamin Graham
Benjamin Graham