# Understand - The Best Way To Play In The Stock Market

by Manoj Ojha Content Writer

First of all, when you decide on investing in the stock market, then you have to determine which stocks to invest in and which shares are right for you. It means that you have to evaluate which stocks you want to give returns.

Establish The Type Of Return

Return is either the amount of extra cash that has been created or the sum lost from the investment. It is communicated as a percentage change. For example, if you purchased Apple stock for \$ 200 and it became \$ 250, and you sold it for \$ 150.

You would have made a \$ 50 benefit on that initial \$ 200 investment. If you communicated it as a percentage, the return would be the new cost, and the stock would be purchased by subtracting the sum you purchased and divided it by the original purchase price.

Return = (P2 - P1) / P1

If you multiply by 100, you can get the percentage value. So let's go back to the Apple question. If you bought the stock at \$ 100 and sold at \$ 150, the return you generated is (\$ 150–100) / 100 = 0.5 or 0.5 * 100 = 50 percent.

You buy a part of the business in a listed company. You share the profits of that company and invest money in return.

Your outlook can be a long-term view, and therefore you will be performing fundamental analysis of the performance of that stock, as well as the returns you are expected to deliver.

So you are expected to have a future performance because you are looking at performance and past performance. For stocks, past performance will not always reflect future performance.

Past Performance

The price-to-earnings (P/E) ratio assists investors in deciding the market estimation of stock in contrast with the organization's earnings.

Notwithstanding indicating whether an organization's capital is exaggerated or underestimated, P/E can tell how its industry gathering or benchmarks esteem a share, for example, the S&P 500 list.

A high P/E may imply that the stock price is high compared with earnings and perhaps exaggerated. On the other hand, a low P/E may demonstrate that the present stock price is small compared with incomes.

In any case, organizations that become quicker than average ordinarily have P/Es, for example, innovation organizations. A high P/E ratio recommends that investors today are eager to follow through on a higher offer cost because of desires for future growth.

Any P/E ratio should be considered against the background of P/E for the organization's business. Investors not only use the P / E ratio to determine the market value of a stock but also in determining future earnings growth.

Commonly known as the PE ratio of a stock, the stock's past performance is based on the price to earnings ratio. Stock prices vary throughout the year, and therefore the PE ratio is calculated at the time of the dividend release date.

The dividend is the share of profits that the company has made in the allotted time frame for the financial year. For example, if the company made a profit of \$ 8.00 per share in a financial year, it could issue \$ 2.00 of that profit every quarter. Different companies will release earnings in different ways.

It can be as low as once every quarter and once a year. Some companies rely only on capital growth for their investors and have no dividend.

The money held per stock that is issued as a benefit to the owners of the stock is the dividend that is calculated through the Zerodha margin calculator.

What Effects Future Performance

Factors affecting future outcomes may be economic impacts and internal management effects.

Financial issues can affect a company's performance as they affect returns through monetary exchange rates, borrowing power, labour, and capital input considerations.

These effects do not have an immediate impact on company performance but should be evaluated over the long term for future performance expectations.

The future performance of a company will be indicated through all internal factors such as leadership issues, policy direction, and financial planning for the future development of investors.

If leadership or management has changed hands, managers' past performance should be evaluated to determine the likely outcome for the company that has taken on this new management.

"Once a lousy manager, always A bad manager "; Is a common expression within the business world. There is no second chance in management. In a company, changes in policy direction can have a significant impact on future performance.

For example, if a company adopts an environmental policy that forces them to upgrade all their plants and equipment over the next five years, the profits and dividends will not be the same as indicated by their past performance.