Value investing sounds easy.
Some investors think they can focus only on a single variable — like the price-to-earnings (P/E) ratio. This is one of the most commonly used metrics. It divides the current market price of a stock by its earnings per share.
Some investors set a P/E ratio limit, maybe 15. If a stock’s ratio is under 15, it’s a value stock. These stocks are buys. Stocks with P/Es above 15 are avoided.
This is a popular way to look at stocks. But it’s also ineffective.
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