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The Myth of Cash on the Sidelines

The Compound and Friends

NOTE

Earnings Growth Outpaces Valuation Concerns

In the context of stock investments, while stocks may appear expensive at a moment, the phenomenon of rising earnings growth can counterbalance valuation concerns. As earnings tend to trend higher, often achieving double-digit growth year over year, the increasing denominator in valuation calculations leads to the potential for rising stock prices even amidst decreasing valuations. This dynamic illustrates that stock prices may escalate as earnings grow, regardless of short-term valuation metrics.

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