Relative Valuations of Various Indexes

Following table lists the P/E ratios and earnings growth rates of all vanguard index funds as of 5/31/2005. I find it very useful from time to time to take look at the relative valuations of various indexes to find out overvalued and undervalued spectrums of the entire market. If you believe in the idea of "what goes around, comes around" or "Market rarely accomodates the majority view" then you could find areas to invest and areas to avoid by just looking at the table below. Abandoning entire sector or spectrum of the market is never a good idea but the new money should be directed in the direction the following table is pointing. Please bring your own compass and determine the direction. My views are listed below the table.

Vanguard Index Fund Name	P/E Ratio	Earnings Growth Rate
500 Index Fund Inv	18.1	10.7
Growth Index Fund Inv	24.3	14.3
Total Stock Mkt Idx Inv	19	11
Value Index Fund Inv	15	8.2
Mid-Cap Index Fund Inv	20.6	13
Small-Cap Growth Index	27	17.7
Small-Cap Index Fund Inv	21.8	10.1
Small-Cap Value Index	18.3	4.9
REIT Index Fund Inv	38.7	-4.7
Emerging Mkts Stock Index	10.7	21.2
European Stock Index Inv	16.4	4.5
Pacific Stock Index Inv	13.5	13.5

• The most important thing I notice in the table is the line of REIT index fund. The P/E ratio of 38.7 and negative earnings growth makes me worried about the real estate market.
• The small cap stocks are perceived as riskier investment in the investment community, still, they field higher P/E ratio and lower earnings growth then S&P 500 index fund.
• Emerging markets stock index fund has the lowest P/E ratio and highest earnings growth among all indexes.

All disclaimers apply.