http://profitableinvestingtips.com/profitable-investing-tips/how-to-spot-overpriced-investments How to Spot Overpriced Investments The S&P 500 has been on a steady upward climb for the last nine and a half years. As the market climbs higher and higher the smart investor needs to know how to spot overpriced investments. Ideally, one has bought low at the beginning of the bull market and can sell high before the market or individual stocks correct. The S&P 500 index is four times greater than it was in February of 2009. However, this year the vast majority of gains within the S&P 500 group have come from a handful of well-known tech stocks. CNBC noted that just three stocks are responsible for most of the gains in 2018. Amazon, Netflix and Microsoft together this year are responsible for 71 percent of S&P 500 returns and for 78 percent of Nasdaq 100 returns. The three stocks make up 35 percent, 21 percent and 15 percent of S&P 500 returns, respectively, while making up 41 percent, 21 percent and 15 percent of Nasdaq 100 returns. While some companies in the S&P 500 are simply appreciating less rapidly than the tech darlings, others are losing ground. The best performers are those with the best and reliable earnings quarter after quarter. The question for the wary investor is how to spot overpriced investments in this mix. In this regard, Market Watch says that the average stock is overvalued. The offer three charts, all of which demonstrate that the market is flirting with the sort of valuations that preceded the 1929 crash that ushered in the Great Depression, the Dot Com crash, and the 2008 crash that gave us the Financial Crisis and the Great Recession. The three charts show three things. First, the market is trading about 70% above its historic mean and this has only happened before in the days preceding a crash. Second, the total stock market cap compared to the US GDP is also at a historic high seen only in the days prior to previous market crashes. And, third, the prices of stocks are excessive in relation to the so-called “replacement” value of the companies. This is the Tobin Q ratio. In order to avoid being badly hurt when the market eventually corrects, smart investors can use any or all of these approaches to decide what investments to hold and which to sell.