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We all know about P/E Ratio, but what is this PEG Ratio and what does it mean? The PEG ratio or Price/Earnings to Growth ratio is one of the most popular valuation ratio calculated for determining the relative trade-off between the price of a stock, the earnings per share (EPS), and the company's expected growth rate. This was popularized by Peter Lynch , who wrote "The P/E ratio of any company that's fairly priced will equal its growth rate", i.e., a fairly valued company will have its PEG equal to 1. Basic formula: PEG = (P/E) / (projected growth in earnings). For example, a stock with a P/E of 30 and projected earnings growth next year of 15% would have a PEG of 30 / 15 = 2. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive). What does PEG tell us? PEG, which is derived from P/E ratio, is generally higher for a company with a higher growth rate. Using just the P/E ratio would make high-growth companies overvalued relative

Deciding to invest in a small business can be a wise financial decision if your research is done carefully and thoroughly. Smart and savvy financial advice for any investment is to never invest more than you can afford to lose. Use discretionary funds in order to minimize your risk and maximize your potential for return. Any investment is a risk, but there are ways to ensure that you are making a wise investment. If you do intend on investing larger sums of money, it can be more profitable to invest small amounts with several companies. If a few of the investments do turn out to be losses, they can be offset by a few highly successful investments. No matter what investment strategy you end up taking, it is important to remember not to invest more than you can afford to lose. Professional venture capitalists will tell you there are no magic formulas for deciding where or how to invest your money, but there are basic elements that are important to consider first. Investigate how long a p

Many people are hesitant to invest, even when the market would be in their favor, because they see investment as a dangerous, “high risk” gamble, rather than as an opportunity to grow their wealth.Granted, there is some inherent risk in investing, but it isn’t as wild as some think it is, and more importantly it is a risk that can be managed, if handled correctly. Diversify Your Holdings To the lay investor, diversification is an earful, and probably sounds technically intimidating, but diversification is actually one of the simpler, and most effective, ways to minimize investment risk. Simply put, diversification is not putting all your eggs in one basket. That is to say that you shouldn’t over-invest in one stock or fund, because, while it may be exciting when it is performing well, if the value drops, it will be devastating. Conversely, if you divide your risk across several stocks, you will get multiplied benefits when they are all performing well, and won’t be crushed if one of

We all know mutual funds, but what are inverse mutual funds all about? They are a special type of funds in which the value goes up when the stock market comes down. They are nothing but "short funds" or funds having short positions of the index or stocks. By investing in this fund investors/traders can take advantage of fall in the markets. The main objective of the inverse mutual fund is to provide investors with an alternative during market-decline and in the case where they cannot short sell the index. This type of fund is generally linked to the market index such as the S&P 500 or any other benchmark index. The value of such funds change similar to the traditional funds, on a daily basis, say if the index declines by 1 percent in a day, the fund value increases by 1 percent for that day. In what other ways these funds differ from the traditional funds? While a traditional mutual fund purchases shares of index or stocks, which is income generating in the form dividends