Question: Is it advisable to buy shares based on historical earnings?
One of the fundamental errors of market player is to make decisions based on historical earnings. Such a decision can be a costly affair.
Reasons being, economic situation always keep changing. In addition, each industry also has its own cycles.
It is thus more advantageous to do your own research to try and forecast the profits of a particular company.
If the profits forecast is better than the historical earnings, then it is worth investing in the said company shares.
Points:
Historical Data is just a guide
Do not base your decision on historical profits.
If possible, do both present and future forecasts.
Ref: Making Mistakes in the Stock Market by Wong Yee
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
No comments:
Post a Comment