7 Essential Investing Metrics Every Investor Should Know

Fundemental Strategies

Investing is an age-old practice for trying to build wealth. While inherently risky, investing offers the investor the opportunity to grow a financial empire and secure a prosperous financial future. Many people are wary of investing because of the very real risks associated, and many others are wary due to the complexity of investing. It is important to have a foundational understanding of the strategies and metrics used by advanced investors, so as to potentially increase the likelihood of seeing profitable returns. Here is a brief look at seven metrics every investor should know

  1. Price-to-Earnings Ratio (P/E Ratio): This metric is used to evaluate a company’s stock price relative to its earnings. A higher P/E ratio indicates that investors are willing to pay more for each dollar of earnings.
  2. Return on Equity (ROE): ROE measures a company’s profitability by comparing its net income to shareholder equity. A higher ROE indicates that a company is using its capital more efficiently.
  3. Dividend Yield: Dividend yield is the annual dividend payment per share divided by the stock price. This metric is important for income investors who are looking for stocks that pay dividends.
  4. Price-to-Book Ratio (P/B Ratio): The P/B ratio compares a company’s stock price to its book value, which is the value of the company’s assets minus its liabilities. A lower P/B ratio indicates that a company may be undervalued.
  5. Debt-to-Equity Ratio: The debt-to-equity ratio measures a company’s debt relative to its equity. A high debt-to-equity ratio can indicate that a company is taking on too much debt and may be risky for investors.
  6. Earnings Per Share (EPS): EPS measures a company’s net income divided by the number of outstanding shares. A higher EPS indicates that a company is generating more profit per share.
  7. Volatility: Volatility measures the degree of fluctuation in a security’s price over time. High volatility can indicate that a security is risky, while low volatility can indicate that it’s more stable. Understanding volatility is important for investors who want to manage risk in their portfolios.

It is important for any investor — beginner or advanced — to have a thorough understanding of these metrics, as they will help the trader to make more informed trades. These metrics, while not inclusive of all investing metrics, are a few of the most foundational ones every investor should become familiar with.

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Jeff Sekinger

Jeff Sekinger Founder & CEO, 0 Percent Who is Jeff Sekinger? Visionary Trailblazer Sekinger has been in the financial industry for over a decade. Starting

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