Invert Ltd

Invert Ltd

This is a common occurrence. You heard people say that "the real estate sector is hot" or "the Internet sector is growing rapidly" or "going to buy the oil sector now. Energy prices will rise again next year. Sound familiar? It is. This is because these people urged to invest in specific sectors.

What is wrong with investing in the sector? There is a common belief that rising tide lifts all boats. As Therefore, when Internet search is hot, then all companies in the field of Looksmart Google for two to three fold increase, right? Waiting one minute. Have you looked at the graph of Looksmart lately? If you do not have, here is the graph of two years of Looksmart Ltd. Let me show you another example. Everyone knows about increasing energy prices, particularly oil. Therefore, if you look at the graph of five years for energy companies Chevron and the like, you can expect a similar move upward trend, right? Incorrect. Take a look at a graph of five years of an energy company Ivanhoe Energy Inc. here.

Therefore, we must look for when investing sectors? Of course. Sector search is very useful during preliminary investigation. automobile sector has been reduced. This could be a good place to find stock bargains, right? Yes Should we blindly invest in all stocks in the industry automobile? The answer is no. This goes back to the goal of an investor. Investors exists to make the best possible performance of the assets and minimize risks. The way sensible to do so is to compare investment alternatives and pick the investment vehicles that may give investors the highest return. In the case of material, we seeing the benefit expected from a company regarding its share price. This is the basis of the profitability of investment by equity investors.

Therefore, once we identify that the car industry is a business, your task continues. You should find companies that can give higher performance than the ten-year risk free Treasury bond. At present, the next ten years is giving 4.52%. Since 4.52% is risk free, we must find actions that can yield more than 4.52% for the foreseeable future. Interest rate of a common stock can be calculated by dividing the earnings per share (EPS) with the price of the shares. If reverses this relationship will provide the most spoken in the investment community, Price Earning (P / U).

Sector search is very useful in identifying future investment prospects. However, do not just blindly invest in stocks in the specific field. In the long term, stock price is correlated with the amount of benefits it can produce. stock price does not correlate with the performance of other peers in the industry.

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