Lets take a trip down memory lane. About 15 years ago the newspapers were full of articles about investing. And particular about investing in Tech-stocks. The general tenor in all these articles was, you would be stupid not to invest in these stocks. Every newspaper, magazine or financial tv-show screamed this message!
A lot of people bought these stocks and dreamed about retiring early, quitting their job etc. And then, we now all know, the tech-bubble bursted! A lot of people lost almost all their savings or pension.
What did I do during this bubble? I just started working and was saving about 15% of my income. But because I just started, this was not a big amount every month. I had some mutual funds. One of these funds was a tech fund. When it went down, I sold with a lost of approx. 8%. It was my first actual lost. And it felt bad! Luckily my overall portfolio did not lose much of my precious saving. This was due to the fact that I had a diverse portfolio.
A that time I just read The Intelligent Investor. One of the lessons I learned from this book was that when the newspapers start talking about investing and/or on every birthday party all people talk about was investing; it is time to watch out. These are the first signs of an overvalued market.
Now lets take a big leap back to the future. Today the interest rates here in Europe are very low. Some countries even have negative interest rates. Due to these rates, dividend stocks are very popular. Newspapers are full of articles about dividend investing. Not only in Europe, also in the States there is much interest nowadays in dividend stocks.
If we take a look at stocks today and put them in a historical perspective, then it is save to say that the market in general is overvalued. But with these interest rates it is not very strange. Because people always will seek opportunities to make some money. So it is not a surprise that dividend stocks are hot.
If we put the two points together from this article, I start wondering if we have a dividend bubble? What do you think? Do we have a dividend bubble?