Financial investments are a tricky business.
They involve countless risks, complicated profitability calculations, turn over ratios, estimations of future performances and then making judgments on the basis of these complex risk rates and calculations.
Therefore, financial investments particularly investments in stocks are deemed to be territories where only wise and shrewd succeed and make profits.
Moreover, the dark looming financial conditions which resulted after the rescission of 2000's has made investing in stocks more and more risky.
The reason the stocks are now termed as risky investments are because they are presumed to be not reflecting their true price which has the potential to hurt the investor i.
e.
you.
However, the picture for potential investors is not that gloomy as there is a silver lining to the picture too.
The stocks which don't reflect their true, intrinsic prices and are traded in the market at magnified or deflated prices are called undervalued or overvalued stocks.
The description of these stocks, their implications and the benefits for the investors and the companies to which they belong are discussed below in great detail.
The stocks which are traded in the market at a price which is exaggerated and much higher than their true price or intrinsic price are called overvalued stocks.
Overvalued stocks mean that more and more cash flows into the pockets of the company from your pockets.
Overvalued stocks ensure more profits for the company than the realized profits and more money for the share holders.
It means that you spend more on that particular stock then required.
So, overvalued stocks are bad for you, but good for the company.
The stocks which are traded in the market at a price which is significantly lower than their true price or intrinsic price are called undervalued stocks.
Investing in Undervalued stocks mean that you are spending lesser amount on a particular stock than normal.
In profitability terms, it means that you are benefiting but the company is losing out on its actual profits, which has harmful consequences for the share holders.
So if you are shrewd investor with knack for investing then you will stay away from overvalued stocks and buy all the undervalued stocks that you can lay your hands on.
Then you can make more and more money on those undervalued stocks by selling them when they are overvalued.
Sounds fun and mad profitable right? So start investing in stocks.
They involve countless risks, complicated profitability calculations, turn over ratios, estimations of future performances and then making judgments on the basis of these complex risk rates and calculations.
Therefore, financial investments particularly investments in stocks are deemed to be territories where only wise and shrewd succeed and make profits.
Moreover, the dark looming financial conditions which resulted after the rescission of 2000's has made investing in stocks more and more risky.
The reason the stocks are now termed as risky investments are because they are presumed to be not reflecting their true price which has the potential to hurt the investor i.
e.
you.
However, the picture for potential investors is not that gloomy as there is a silver lining to the picture too.
The stocks which don't reflect their true, intrinsic prices and are traded in the market at magnified or deflated prices are called undervalued or overvalued stocks.
The description of these stocks, their implications and the benefits for the investors and the companies to which they belong are discussed below in great detail.
The stocks which are traded in the market at a price which is exaggerated and much higher than their true price or intrinsic price are called overvalued stocks.
Overvalued stocks mean that more and more cash flows into the pockets of the company from your pockets.
Overvalued stocks ensure more profits for the company than the realized profits and more money for the share holders.
It means that you spend more on that particular stock then required.
So, overvalued stocks are bad for you, but good for the company.
The stocks which are traded in the market at a price which is significantly lower than their true price or intrinsic price are called undervalued stocks.
Investing in Undervalued stocks mean that you are spending lesser amount on a particular stock than normal.
In profitability terms, it means that you are benefiting but the company is losing out on its actual profits, which has harmful consequences for the share holders.
So if you are shrewd investor with knack for investing then you will stay away from overvalued stocks and buy all the undervalued stocks that you can lay your hands on.
Then you can make more and more money on those undervalued stocks by selling them when they are overvalued.
Sounds fun and mad profitable right? So start investing in stocks.