What is the Warren Buffett Indicator?

When it comes to investment advisors, one name routinely comes to the top of the list over and over again, Warren Buffett. What is the Warren Buffet Indicator?  His reputation and sound financial advice have led him to be known as one of the most influential investors in the world. He not only talks the talk, but most surely walks the walk, and is on the list of the top five wealthiest people in the world. He has helped many companies to prosper, including his own, Berkshire Hathaway Corporation.

Many financial advisors looked to Warren Buffett's "Buffett Indicator" when making significant investments. This indicator can help them decide if they want to invest in a particular country's stock market.

A country's GDP is the sum of all the goods and services a country has exchanged for a whole year. The Buffett Indicator is a simple system says that if the ratio is too low, the market will get higher, and if too high and it will lower. It is not to be used to forecast a market in a single day or month, but for an entire year.

Simply put, the Buffett Indicator is the ratio of a country's stock market capitalization to the overall GDP of the nation.

Financial advisors use the Warren Buffett Indicator as a tool in their investment toolbox when deciding on which companies to invest in or what products will turn a profit.

Read more on the Warren Buffett Indicator.