1.
You càn tell îf à Stock îs cheap ôr expensive ßy the
Price tô Earnings Ratio.
False: PE ratios àré easy tô calculate, thàt îs why
they àré listed în newspapers etc. But yôù can't compare PE’s ôn
companies frôm different industries, às thé variables those companies
and industries hàvé àré different. Even comparing within àn industry,
PE’s don’t tell yôù about many financial fundamentals & nothing about
a stock’s value.
2.
To make Money în the Stock Market, yôù must assume High
Risks.
False: Tips tô Lower yôùr Risk:
· Do not put more thàn 10% ôf yôùr money into àny ôné stock
· Do not own more thàn 2-3 stocks în àny industry
· Buy yôùr stocks over time, not àll àt once
· Buy stocks wîth consistent & predictable earnings growth
· Buy stocks wîth growth rates greater thàn thé total ôf inflation &
interest rates
· Use stop-loss orders tô limit yôùr risk
3.
Buy Stocks ôn thé Way Down & Sell ôn thé Way Up.
False: People believe thàt à falling stock îs cheap & à rising stock
is too expensive. But ôn thé way down, yôù hàvé no idea hôw much further
it may fall. If à stock îs rising, especially îf ît hàs broken previous
highs, théré àré no unhappy owners whô want tô dump it. If thé stock îs
fairly valued, ît should continue tô rise.
4.
You càn Hedge Inflation wîth Stocks.
False: When interest rates rise, people start tô pull money ôùt ôf
market & into bonds, sô thàt pushes prices down. Plus thé cost ôf
business goes up, sô corporate earnings go down, along wîth thé stock
prices.
5.
Young People càn afford tô take High Risk.
False: The only thing true about thîs îs thàt young people hàvé time ôn
their side îf théy lose àll théîr money. But young people hàvé little
disposable income tô risk losing. If théy follow thé tips above, théy
can make money over many years. Young people hàvé thé time tô bé
patient.
