"I am here putting my personal experience and few good tips collecting from market wide. I am not responsible for any kind of loss arising out of any information, posts or opinion appearing on this blog. Thank You Friends"

 

If you wish to invest in the stock markets and know nothing about them, one convenient way is to opt for mutual funds. If you are keen on investing directly, then do allocate the necessary time, energy and resources.

Have a long-term horizon 

Like a company shareholder, give your investments time to grow. Enter the markets with realistic return expectations, and not outrageous ones. Remember that time is the best antidote to risk: the longer your investment horizon, the lower the volatility of returns ..

Analyse, then buy

Analyse the company with the same level of rigour as you would if you were the owner. Initially stick to sectors that you know best. Doctors, for instance, should invest in pharma companies first. Compare a company's ratios with the index and industry historical averages. Look for the following ratio-based characteristics in a stock you are keen on: low PE, low PB, high dividend yield, low debt to equity ratio, and high RoCE and high RoNW.
With the markets split between good but overvalued stocks and poor but undervalued ones, here are a few ratios you should look up before you buy.


1. PRICE TO EARNINGS RATIO

The most commonly used ratio, it compares the price of a stock to the company's earning per share (EPS). The EPS can be either for the past four quarters (historical or trailing PE) or for the coming four quarters (forward PE).

2. PRICE TO BOOK VALUE RATIO

This ratio compares the price of a stock with its book value. The book value is the net value of the company's total assets minus its liabilities. In other words, it is what shareholders will be left with if the company goes bankrupt.
3. PRICE TO SALES RATIO

This ratio compares the price of a stock to the revenue earned per share. The revenue for the past four quarters is used in this calculation.
4. DEBT-TO-EQUITY RATIO

It measures a company's leverage by comparing its debt with its equity base. The ratio indicates the proportion of the company's assets that are being financed through debt.
5. ASSET TURNOVER RATIO

The ratio measures the sales generated for every rupee worth of assets. It shows a firm's efficiency in using its assets to generate revenue.

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