Eli5 the concept of using Market Capitalization and P/E Ratios to choose stocks to buy
In: Economics
Market Cap would only indicate a company’s size (in terms of equity value), which would mostly just serve as a rough proxy of the risk involved. Typically, smaller caps are riskier and as a result come at a lower price.
P/E is just the ratio of price to earnings. As a simplification, it’s how much the company earns relative to how much it costs to own the company.
Would just invest in ETFs if I were you though. I’ve met a few people who are genuinely equipped to “outsmart” the market, and they do so conservatively. They also come from financial market backgrounds and basically worked in the field. Contrast this with your average wannabe that basically flips a coin to figure out if they’re “smart” or “unlucky”.
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