Savings and Investments

Market Timing, Technical Analysis, and Fundamental Analysis

What is a multiple?

In the example of a company with a PE ratio of 15, it is also called “trading at a multiple of 15,” meaning that someone who buys this stock is willing to pay $15 for every dollar of earnings, or a multiple of earnings. The PE ratio may be used to see how a company compares to its peers, and whether a stock price is too expensive or trading at a discount relative to its peers. Stocks with very high PE ratios are very highly in demand, as investors have bid up the price of a stock in order to profit on expected earnings in the future.

You should occasionally check your portfolio to make sure that your investments are diversified in the percentages that you wish. Over time, for instance, some investments may increase or decrease to total an undesirable percentage of your total investments. At such times, you should shift your money as needed to either more aggressive or more conservative investments, depending on your goals.


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