Are Investors Too Bullish?

As a group, the retail investing public tends to arrive to the party late and stays too long. This chart comes courtesy of the WSJ Daily Shot and TD Ameritrade. According to TD Ameritrade, retail investors are more bullish than they have been in years. Elevated levels of investor sentiment tend to be most useful as a contrary indicator. The higher investor sentiment, the lower you should set your return expectations and the more you should demand those returns in the form of dividend payments. Share prices tend to fluctuate wildly as sentiment shifts, dividend payments do not.