P/E Ratio and how it helps in investing in stock market

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Saurabh Guptahttp://karekaise.in
नई तकनीक का आविष्कार, गैजेट्स, उपभोक्ता प्रौद्योगिकी और सॉफ्टवेयर के लिए आपका स्रोत. कंप्यूटर, स्मार्टफोन, इलेक्ट्रॉनिक गैजेट्स और इंटरनेट सामग्री पर नवीनतम रुझानों के लिए हमारी वेबसाइट देखें!

If you want to become a successful investor in the stock market, then you have to pay attention to many things and to P/E Ratio Whether you invest in stock market for long term or do intraday trading.

It is essential to choose a good stock in every circumstance.  Today I am telling you a trick by which you can know in a second whether you should buy this stock or not.

Friends, all of us adopt all the methods of choosing a good stock.  Select the share.  When you start buying it, many types of doubts start arising in your mind.  This stock is not expensive.  After taking it, its price will not fall down.

If doubts are also arising in your mind that the stock we are going to buy is cheap or expensive.  How to find out  So I am sharing a very good knowledge for you, whose name is P/E Ratio.

What is P/E Ratio


P/E Ratio stands for Price Earning Ratio.

In simple language, it means that how much money we will get by investing how much money.

Let us understand this by example.  The price of 1 share of Reliance Company is currently ₹ 2000.  This company has given ₹ 200 profit in last 1 year.  If I want to find its  P/E Ratio  then we get 2000/ 200 = 10.

This means that you have to invest ₹ 10 in Reliance company to earn ₹ 1 Or in another language, on an investment of ₹ 2000, we will get ₹ 200.

Thus it is what is obtained by dividing the market price per share by the income given by him, the same is the P/E Ratio.

What should be the P/E Ratio to buy shares


Now the question will arise in your mind that while buying shares, how much P/E Ratio should we buy shares and how much  should we not buy shares.

Generally financial advisors say that we should not buy those whose P/E Ratio is more than 30.  Because if I get ₹ 1 annually by putting ₹ 30, even then it can be considered fine.  But if I get ₹ 1 by putting more than that, it can never be considered right.

By the way, as the company keeps making profits, its P/E Ratio keeps increasing.  So you can see the profits of the company for the last few years.  It is not necessary that due to high Ratio, do not invest in that stock.

Is it right to choose a good stock only by it?


If you are thinking that I have come to know the P/E Ratio and seeing this I will become a successful investor by buying good shares then you are thinking it wrong.  Sometimes we also get confused.  Wrong Ratio Tour also we incur loss by buying wrong shares.

There are also many companies whose P/E Ratio fluctuates a lot.  That is, in some years it increases very much and at some point it becomes very less.

Let’s take the example of a real estate company.  Some year even 50 houses are not sold and some year 500 houses are sold.  Let us assume the  P/E Ratio  of the year in which 500 houses of this company have been sold.  We buy shares thinking that the P/E Ratio is low.

Next year even 50 houses are not sold and we have to bear the loss.  So you should not depend only on P/E Ratio.

What else does it tell?


The P/E Ratio can predict whether a company’s shares are cheap or expensive.  Apart from this you can also guess whether the stock market is expensive or cheap at present.

What I mean to say is that many times new investors think that when the market is cheap, then I will start investing.  How to know whether the market is cheap or expensive now?  For that you can see the P/E Ratio of the market.

There are mainly two places, buying and selling of shares in the Indian market.  One is Sensex and the other is Nifty.  Sensex represents 30 company and Nifty represents 50 company of India.

Sensex and Nifty tell what is the condition of Indian market right now.  If you are a new investor or are thinking of investing in the stock market, then definitely go and see the P/E Ratio of Sensex and Nifty.  You will get to know whether the Indian stock market is cheap or expensive right now.

If it is cheap then you start investing and if it is expensive then you can wait for some time.  Well, this is seen in lump sum investment.  When you are thinking of starting a SIP, you can start anytime.

It’s varies up and down


The P/E Ratio is always changing.  It’s not that the P/E ratio you see once will be there forever.  Suppose the P/E Ratio of a company is 25 now.

After a few days the company made good profits and its share price increased.  Because everyone started buying his shares.  We will increase the P/E Ratio of that company.

Therefore, at the time when you buy the share, at that time also see the P / E Ratio of that share.

I am going to tell you one thing while going, the more profitable the stock market, the more harmful it is.  In this, we can earn lakhs in a day and we can also lose lakhs.

You should think of investing in this only when you are ready to earn and lose lakhs.  Do not invest anywhere at the behest of anyone.  Take a decision wisely.  You have the first right on your hard earned money.

Do not invest in any stock at the behest of anyone.  Please consult an expert before investing.  No matter how big a player you are, but by taking a loan, investing in the stock market anytime, you can get into more trouble.

Thanks for reading this article! If you like it then please share it with your friends.

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