Six ways to spot overpriced shares

Stockmarkets may be soaring, but most gains are being driven by a glut of cheap money rather than solid fundamentals. So you need to be sure the shares you're buying can stand a market retreat.

Last week the Dow Jones burst through the 13,000 level to set a new record, while the FTSE 100 is hovering at less than 10% below its all-time high. As Al Goldman of AG Edwards told the FT: "We have come awful far, awful fast." The danger, as investment bank Morgan Stanley points out, is that gains are being driven more by cheap money and merger fever than solid fundamentals. As Warren Buffett always says, "a rising tide tends to lift all boats", so how can you avoid buying a share that is overvalued and will be exposed if the market retreats? Here are six signs to watch out for.

Spot overpriced shares: High p/e or low earnings yield

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.