Investment

Investment

What is Investment?

The money you earn is partly spent and the rest saved for meeting future expenses Instead of keeping the saving idle you may like to use saving in order to get return on it in future . This is called Investment.

Why should one Invest?

One need to invest to:-

• Earn return on your idle resources
• Generate a specified sum of money for a special goal in life
• Make a provision for an uncertain future

When to start investing?

• Invest early
• Invest regularly
• Invest for long term and short term

What care should one take while investing?

(12 important steps to investing)

1. Obtain written documents explaining the investment
2. Read and understand such documents
3. Verify the legitimacy of the investment
4. Find out the costs and benefits associated with the investment
5. Assess the risk-return profile of investment
6. Know the liquidity and safety aspects of the investment
7. Ascertain if it is appropriate for your specific goals
8. Compare these details with other investment opportunities available
9. Examine if it fits in with other investments you are considering or you have already made
10. Deal only through an authorized intermediary
11. Seek all clarification about the intermediary and the investment
12. Explore the options available to you if something were to go wrong and then, if satisfied, make investment

What are various option available for investments?

Investment in physical assets:-

• Real estate
• Gold/jewellery
• Commodities

Investment in Financial assets

• FD with bank
• Saving with post office
• Insurance
• Provident fund
• Pension fund
• Security market-share, bonds, debentures

Types of investment options:-

Short term investment option

• Saving bank account
• Money market/liquid fund
• Fixed deposits with banks

Long term investment option

• Post office saving
• Public provident fund
• Company fixed deposit
• Bonds and debentures
• Mutual funds

P/E Ratio

Price-Earnings Ratio - P/E Ratio

What Does Price-Earnings Ratio - P/E Ratio Mean?
A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:



For example, if a company is currently trading at Rs.100 a share and earnings over the last 12 months were Rs.50 per share, the P/E ratio for the stock would be 2 (Rs.100/Rs.50).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

Also sometimes known as "price multiple" or "earnings multiple".

Explanation:-Price-Earnings Ratio - P/E Ratio

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.