The thing there is no right or wrong time to invest in market. Your investment decision should depend on the price of stock and strength of the stock. There is no exact definition for right stock. . Investing in companies whose stock prices are currently undervalued but the company has good growth potential in future would be called as investing in undervalued stocks and generally advisable.
Following are couple of ratios to find undervalued stocks but to take decisions for investment further analysis is important and these ratios don't provide all information.
Low Price to Earnings (PE) ratio -
PE ratio is one of the most important ratio on which most of the traders and investors keep watch. The PE ratio tells you whether the stock's price is high or low relative to its earnings. The high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. but, the P/E ratio doesn't tell us the whole story of the company. It's more useful to compare the P/E ratios of one company to other companies in the same sector/industry and not in different sectors. PE ratio of less then 10 is generally considered as undervalued provided it has future growth potential. And in some scenarios PE of 10 to 15 can also be considered provided the company has high growth performance in past and expecting same in future. Generally stocks bought below 10 and kept invested for long term given more great returns.
Low Price to Book Value (PB)-
Basically PB ratio is mostly utilized by value investors to find real wealth when the stocks are at their lower prices. So investing in stocks having low PB ratio is to identify potential candidates for future growth. A lower P/B ratio could mean that the stock is undervalued. Book value - It is the total value of the company's assets that share holders would receive if a company closed down. Like the PE, the lower the PB, the better the value of the stock for future growth. Some of the investors become quite wealthy by holding stocks for the long term of such companies whose growth is based on their businesses instead of market. If the stock's price to book value is below 1 then it is considered as undervalued.
Earning Per share
EPS shows how the company is profitable and growing. EPS of a company should keep increasing year after year. So the conclusion is to have a look for the past 4 to 5 years EPS and check the consistent incremental growth in the ratio.
Above three are most widely used ratios but decision based on only above is not advisable.
Experts also suggest opening multiple accounts because different accounts offer different kinds of specials. For example TradeMonster rates for Options Trading is exceptional, on the other hand TradeKing offers one of the cheapest rates for Stocks trading. Incidentally both of them have specials going on currently for new accounts. For more details on how to select a brokerage firm for your needs, check out http://www.comparebroker.com - "Finding Best Online Discount Stock Brokers". You will find the special offers going on from major online stock brokerage firms.
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CompareBroker aims at helping Traders (Stocks, Equities, Options, IRA, Mutual Funds) to make smart investing decision in stock market. We partner with different online stock brokers and bring out their value proposition to consumers for a fair comparison.
Finding Best Online Discount Stock Brokers
Thursday, April 23, 2009
How Much Money Should A First Time Investor Start With ?
http://www.prlog.org/10223552-how-much-money-should-first-time-investor-start-with.html
First of all the investor has to make sure that they are being honest with themselves. How much money you are "saving" over having to pay the expense ratio of an index fund or low cost actively-managed value fund. If you are still coming out ahead, then great! You are doing very well! If not, that's okay too, but at least you know this and you then need to ask yourself if all this effort and time you are putting in is worth it to trail the market.
Big thing to keep in mind is expenses. If you buy in increments of $100 at a time and it costs $9.99 both to buy and sell the stock, you then have to make a 25% return just to break even on your commission costs ($100 principal - $10.00 to buy - $10.00 to sell = $80, $100/$80 = 1.25. Usually it is recommended that expenses don't take up more than 2% of your principal, which would put individual trades (on average) somewhere more around the $1,000 mark. So going by that $1000 is more practical. But yes, $5000 is probably ideal for beginners as it gives a little bit of room to absorb the initial losses if you happen to occur any.
Most big brand name brokers might be reluctant to tolerate that small an account such as 100$. Alternatives to that would be dividend reinvestment programs or Share Builder programs that accommodate small amounts. You can find more about these types of brokerage firms in our Fractional stocks tab.
That said, you don't want to be betting large amounts relative to your net worth "just to get some action going." If $1,000 is a significant amount of your net worth then you might be better advised putting it in an index fund or a low cost value fund like DODGX until you have larger amounts of principal to invest meaningful, but not excessive, percentages of your net worth on individual stocks. Always remeber never put all your savings in stock market. Always keep atleast 20% in cash format either in savings or money market account. This you would need during emergencies.
Another alternatives for small first time investors might be to try out some "fake" money investment tools like Yahoo finance. That will make you familiar with the process so you don’t end up with playing with your real money while you are still picking up the basics.
The bottom line is that it’s definitely encouraged to keep tabs on your investing expenses. Look at your commissions, Wall Street Journal, Morningstar, Value Line, Motley Fool, etc. subscriptions and add all that up to come up with your math to see if it is for you.
For further information on finding cheap online discount stock brokers please visit www.comparebroker.com
# # #
CompareBroker aims at helping Traders (Stocks, Equities, Options, IRA, Mutual Funds) to make smart investing decision in stock market. We partner with different online stock brokers and bring out their value proposition to consumers for a fair comparison.
First of all the investor has to make sure that they are being honest with themselves. How much money you are "saving" over having to pay the expense ratio of an index fund or low cost actively-managed value fund. If you are still coming out ahead, then great! You are doing very well! If not, that's okay too, but at least you know this and you then need to ask yourself if all this effort and time you are putting in is worth it to trail the market.
Big thing to keep in mind is expenses. If you buy in increments of $100 at a time and it costs $9.99 both to buy and sell the stock, you then have to make a 25% return just to break even on your commission costs ($100 principal - $10.00 to buy - $10.00 to sell = $80, $100/$80 = 1.25. Usually it is recommended that expenses don't take up more than 2% of your principal, which would put individual trades (on average) somewhere more around the $1,000 mark. So going by that $1000 is more practical. But yes, $5000 is probably ideal for beginners as it gives a little bit of room to absorb the initial losses if you happen to occur any.
Most big brand name brokers might be reluctant to tolerate that small an account such as 100$. Alternatives to that would be dividend reinvestment programs or Share Builder programs that accommodate small amounts. You can find more about these types of brokerage firms in our Fractional stocks tab.
That said, you don't want to be betting large amounts relative to your net worth "just to get some action going." If $1,000 is a significant amount of your net worth then you might be better advised putting it in an index fund or a low cost value fund like DODGX until you have larger amounts of principal to invest meaningful, but not excessive, percentages of your net worth on individual stocks. Always remeber never put all your savings in stock market. Always keep atleast 20% in cash format either in savings or money market account. This you would need during emergencies.
Another alternatives for small first time investors might be to try out some "fake" money investment tools like Yahoo finance. That will make you familiar with the process so you don’t end up with playing with your real money while you are still picking up the basics.
The bottom line is that it’s definitely encouraged to keep tabs on your investing expenses. Look at your commissions, Wall Street Journal, Morningstar, Value Line, Motley Fool, etc. subscriptions and add all that up to come up with your math to see if it is for you.
For further information on finding cheap online discount stock brokers please visit www.comparebroker.com
# # #
CompareBroker aims at helping Traders (Stocks, Equities, Options, IRA, Mutual Funds) to make smart investing decision in stock market. We partner with different online stock brokers and bring out their value proposition to consumers for a fair comparison.
Monday, April 20, 2009
Should I Invest now?
Well read this article. The gist of the article is that there isn’t a good or bad time to invest. No matter WHEN you are investing, you got to use your brain. Following article talks a little bit about the logic to use for investing
Why should I invest now
Why should I invest now
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