Investment Dilemma!!

Quibit · 1 Investment Dilemma!! Thu Feb 09, 2012 11:28 am

Quibit

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Why should anybody invest in companies that are above 10X PER when interest are around 12% and heading North.

By investing in a company with 10XPER you are paying 10 times more than earnings which is similar to 10 year recovery period. By investing in a deposit that yields 12% p.a. interest you could recover your investment in (100/12)= 8.3 years.

Which investment is better! Share your views!

Last edited by Quibit on Thu Feb 09, 2012 3:22 pm; edited 2 times in total

Leo · 2 Re: Investment Dilemma!! Thu Feb 09, 2012 11:43 am

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deposit :

what am i doing with Shares affraid

greedy · 3 Re: Investment Dilemma!! Thu Feb 09, 2012 11:46 am

greedy

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Quibit wrote:Why should anybody invest in a companies that are above 10X PER when interest are around 15% and heading North.

Better comparison is between deposit rates and PE Ratio. Because available alternatives for an investor are bonds and bank deposits. Bank deposit rates are not 15% at the moment it is below 8% at present.

Average Weighted Prime Lending Rate (AWPR) is 9.98% (6 months rate) and monthly rate is around 11.5% this week.

Average Weighted Fixed Deposit Rate (AWFDR) is 9.11% and six months rate is around 7%.

http://www.cbsl.gov.lk/htm/english/_cei/ir/i_4.asp

So.... at the moment PER below 10 is attractive compared to interest rates prevailing.

Last edited by greedy on Thu Feb 09, 2012 11:47 am; edited 1 time in total

WildBear · 4 Re: Investment Dilemma!! Thu Feb 09, 2012 11:46 am

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In capital markets, a x10 PE stock can become a x15 PE, stock within no time or at least medium term 1-2 years, which will give you a 50 % return.

Last edited by WildBear on Thu Feb 09, 2012 11:49 am; edited 1 time in total

sriranga · 5 Re: Investment Dilemma!! Thu Feb 09, 2012 11:48 am

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Calculation wise the argument got fact.
In share market investment has time frame. Trading we need to go with the trend.
If we are panicking share market investing or trading is not possible, better to go for FD.
IMOH still in CSE some options are available.
We need to do our own home work before investing or trading.
Do not rely on others facts and advice.( Those may be suitable for them not for us)

sapumal · 6 Re: Investment Dilemma!! Thu Feb 09, 2012 11:55 am

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What about if rupee is going to fall ? You think you will get 12%. But adjust it with 3% devaluation. Overall it is 9%.

Asset with good return (PE above 5) are good.

Also do you think 15% is long term interest rate ? I think it is to collect rupee from market and to stop exponential credit growth
When credit expansion controlled devaluation allowed (restrict import and credit) again interest rates will go down

K.Haputantri · 7 Re: Investment Dilemma!! Thu Feb 09, 2012 11:57 am

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Agree with you Shri. Ability to take risks is amply rewarded in the share market. Those who have no such ability may opt for safer placesto park their money.

airborne · 8 Re: Investment Dilemma!! Thu Feb 09, 2012 12:05 pm

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Hi.. Good one, even I wonder why, then again most of us want to get rich quick. 10% a day is too good to be lost on 10% per annum. Some of us also may be sadists and like the pain when prices fall. Very Happy

By the way a 12% return compounded takes only just over six years for a 100% return.

greedy · 9 Re: Investment Dilemma!! Thu Feb 09, 2012 12:23 pm