Evaluate Value stocks and Growth Stocks

 Evaluate Value Stocks

Value investors do not base their investment decisions on hot tips, the latest investment trends, or chart patterns. Instead, they base their decisions on deep quantitative and qualitative research. Value investors spend time analyzing companies financials and pay particular attention to valuation ratios such as the price to earnings(P/E) ratio, the price to book (P/B) ratio and the free cash flow (FCF) ratio. They also often use discounted cash flow(DCF) models to determine whether a company is undervalued by the market. They like stocks that offer a significant 'margin of safety-those trading well below their true value.

Evaluate Growth Stocks

Growth stocks are simply evaluated as the present value of cash flows expected in the future. If we expect an stock to return $100, $200 and $300 in the coming first, second and third year, then the present value calculation of all these returns is its overall value.

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Value stocks and Growth Stocks

 Value Stocks and Growth Stocks

Growth stocks are the stocks whose value is expected to grow in the future because its sales is expected to grow. In the same examples as above, if the price of facebook stock is $100 rather than $50, which is its original value, then a growth investor can decide to invest in it. This is because he may calculate that the price of stocks to rise further. If the investment is done this way then they are growth investors.

The characteristics which the growth funds can show are as follows::::::::::

• Growth stocks can be Higher priced than broader market::::: It can be seen that growth funds are higher priced than rest of the other funds in the market. This is because investors can be seen willing to pay higher price to earnings multiples price. This is done by investors because they expect these stocks can be sold in higher prices as the company grow further in the future.
• Growth stocks have higher earnings growth records:::::::::: During the time of slower economic growth, the earnings of some companies may be depressed. But growth companies may continue to achieve higher growth regardless of what the economic conditions are.
• Growth stocks are more volatile than broader market::::::::::::::: Generally it is found that the growth stocks are more volatile and can fall sharply overnight. 

Value stocks are the stocks whose Market value is less than its underlying value. Thus they provide a very good opportunity to trade. If invested in time, when the values of these stocks correct, it can exponentially boost the earning of the investor. Let us take an example for this: If the value of $50 of facebook stocks sell for $45, then it can be said as undervalued. This is because the market prospects of growing of facebook is high. Thus as a value investor i can expect the price of its stock to reach $50 or higher soon. Thus i will decide to invest in it.

The major characteristics of value stocks incude::::::::::

• Value stocks are lower priced than broader market:::::: The value stocks are lower priced than broader market because general investors haven't realized its importance yet. The main earning idea is that the lower price of the stocks will correct in future and will match its true value.
• Price of value stocks can be below similar companies in the industry:::: The opinion of value investors can be that the majority of value stocks are created because investors have overreacted to the recent company problems and it will solve in the future. The investors may be overreacting to the disappointing earnings of the company problems. They may also be reacting to the negative publicity or legal problems. 
• Value stocks carry somewhat less risk than broader market::::: Value stocks are more suited to long term price fluctuations in comparison to growth stocks. 

Title:::: Value Stocks investment Image

Better performance of stocks:::::::

                  Performance better                         Performance not better

Growth Stocks                         Interest rates are falling                          Economy cooling

Value Stocks                             Economic recovery                        Sustainable bull market

 

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Online investment techniques

 If you want to do investment online, you can use online platforms suggested in your country. Here you can invest on partial as well as full shares of stocks of companies. As the rate of these stocks increase, there will be increase in your income. Thus you can earn some extra income. But you should be careful not to invest more than the level of savings you can handle for a loss. This way you can earn something and also get some time for learning. Here is an example i would like to share with you.

In this example i have shared an investment of $50 in stock of a company. The company is doing good and i have earned $5 within a period of some weeks. Thus my capital now totals $55.01. If i had more investment like a $1000, i would have earned 20 times of that investment and my income would have been $100. This is how this platform works.

What you have to do is simply download the app of trading software, load funds and start trading in the companies of your choice. For some trading platforms the trading amount is a simple of $50. For the rise or fall in the price of shares, these trading platforms give you detail analysis. For further analysis you can rely on your research.

 

 

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An example of Good Investment

An example of good investment is the investment done in the stock of facebook on 2013. In the year 2013,the price of one share of facebook was $30 and in the year 2016, the price of one share of facebookis $110. Thus an investor who invested in one share of facebook on the year 2013 has earned a return of:::::::::::::::

Return::::::::((110-30)/30)*100=266%

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What is Currency Market???????

Currency Market is the market which plays on the fluctuation of Currency Rates. In an open Market Economy the rate of Currency is determined by the amount of Export the Country does. Thus the currency Market plays on the Level of Fluctuation an investor can think of and thus the Margin is his/ her income. This is one of the Fundamentals of Finance.

It is estimated that the currency market is a total of 6.6 Trillion every day in the world. Thus it is one of the biggest and largest market in the world. Traders trade on the upward and downfall of the trading price of the market. Thus they earn if the value of currency increase and lose if the value of currency decrease.

for example if a trader has purchased a Currency for $1 and it's value increased to $2, then the margin is $1 profit. Similarly, if a trader has purchased a currency for $2 and the price decreased to $1, then the margin loss is $1.

As shown in this image, if you purchase a dollar for your currency of 50 and if the price of a dollar increase to 100 of your currency, then you make 100-50=50 profit. Similarly if you purchase an Euro for 50 units of your currency and it increases to 100 units of your currency, then you will make 50 of your currency units profit.

If you want to trade on currency market, you can use platform like www.etoro.com and try some trade practices..

 

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Investment Rule

 One of the best Investment Rule is to never put eggs in One Basket. This means we have to diversify our Investment. This is because if one investment is in loss, it will risk whole of your funds. This is the investment Rule in financial Market. Once the relative risk of the portfolio is determined, it's return is calculated. For this the correlation of Returns of various Assets are calculated. The correlation is an indicator of relative risks. Thus a wise investment decision is the one in which there is a correlation between assets in portfolio Such that it provides a positive return.

 

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Portfolios

 Portfolios are the mix of investments which are done on various Assets. The Assets should be allocated in such ways that it minimises risks and Maximizes the return. Thus to make a portfolio, high risk products and low risk products should be mixed in proper ratio. This mixing should Minimise Risk and Maximize Return such that it Maximizes Profit. There are formulas to calculate the relative risks and Return.

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