How to Buy a Stock
The stock market is definitely a risky game. We absolutely know that when the price is low, we should recover the stock, but how do we predict the price of the stock?
A good suggestion is to weigh the current stock price against its "current market value".
price and What is the difference between the value of the stock?
Basically, during the transaction, the price is determined by the market at that particular moment. The price can change within a few minutes, ie it fluctuates. The value of any given stock is the value (value) of its core business. It is highly stable compared to the price of the stock, because the value of the company can not change overnight. This is a good option if you can buy a stock at a lower price than the actual stock price. For example, a shared value of 200, the current price of only 100, you can get the same share of 50% discount. The probability that a stock's actual value may fall below 100 is rare.
Warren Buffett and Benjamin Graham are known as great legendary investors, The theory is also known as the "margin of safety" found in their teachings. Start by reading all the financial statements related to the stock you want to buy.
If you want some good advice, every share should be assessed.
Net current assets per share = (current assets – liabilities) divided by the number of shares.
Thumb Rules: According to Warren Buffet, you'd better pay about two-thirds of the value of a stock, as a percentage of the value of the stock.
Preferably not more than.
The second method
Look at PE growth rates, where PE growth rate = (market price / earnings per share) divided by annual EPS growth.
and annual EPS growth = (EPS (current year) – EPS (previous year) × 100) Thumb rule: if PE growth rate ] Is less than 1, then it means that the stock value is undervalued, and if it is higher than 1, then it is overvalued, and if it is 1, then it is an indication of a reasonable share of value.
PE: It measures the margin of safety
Let us assume a stock with a price of Rs 550 You bought it. The stock's earnings per share are Rs 50. So a year later, you only earn 50 rupees of investment Rs 550, which is nearly 9% return. Bank deposits can also get this amount, it is risk-free. Therefore, in the above case, the margin of safety is almost zero. So in order to minimize risk, we should choose a higher gap. Thumb Rule: According to Warren Buffet, this gap must be in the range 1.25-1.5%.
It can be seen that in the booming bull market, almost all stocks are up, and investors eventually pay a higher price for the shares. Therefore, it is troublesome to find stocks with a high margin of safety.