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4 Parameters to Check before Investing in Stock

Posted By On 6/17/2011 11:44:00 PM Under ,
One can use the following parameters to invest in stock market to get good stocks at reasonable price
(a) Price/earnings (P/E) ratio, which compares share prices to annual after-tax earnings
(b) Use Valuation metrics, like the dividend yield, which looks at the dividends you get for each rupee of investment
(c) Cyclically adjusted PE ratio, which compares share prices to earnings over the past 10 years
(d) "Tobin's q," which compares share prices to the actual replacement cost of company assets.

Just remember that one can not get a perfect metric system,but the metrics mentioned in (b), (c) and (d) serial above have better track record than the Price/earnings (PE) ratio. Thus as a value investor one need to study the market with correct parameters to get that value buying to make money in the long run like Warren Buffet who is the guru in value investment.
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