Key Indicators Every Share Market Investor Should Track
Thinking about diving into the stock market or maybe just polishing up your investment game? It might seem overwhelming at first, with so many numbers and graphs flashing on your screen. But here’s the thing: there are a few key indicators that can give you powerful insights into whether a stock is worth your time (and money) or not. These aren’t just numbers for financial experts; they’re tools anyone can use—even if you’re just getting started.
By keeping an eye on these metrics, you’ll be better equipped to make smart choices, minimize risks, and increase your chances of growing your investments. Ready to get a handle on the essentials and feel more confident with your strategy? Here are the top indicators every investor should track.
- Price-to-Earnings Ratio (P/E Ratio)
The P/E ratio is one of the first things to look at when you’re assessing a stock. It’s a simple way to see if a company’s stock price is high or low compared to its earnings. You get this ratio by dividing the stock’s current price by its earnings per share (EPS). Imagine a company with a P/E ratio of 30. This means investors are willing to pay 30 rupees for every rupee the company earns annually. A high P/E can suggest the stock is overvalued, while a low P/E might mean it’s undervalued.
Take a look at your favorite stock in your stocks app—what’s the P/E ratio? Higher or lower than the market average?
- Earnings Per Share (EPS)
EPS, or Earnings Per Share, measures a company’s profitability on a per-share basis, giving insight into its financial health. Simply put, EPS shows how much money each share of the company generates. If a company earns a total of ₹10 million and has 1 million shares, the EPS would be ₹10. Higher EPS generally indicates higher profitability and growth potential. This can be especially useful when comparing companies in the same sector.
Do you know the EPS of companies you’ve invested in? Check it on trading apps to compare! A company with a higher EPS may be more appealing for investment.
- Return on Equity (ROE)
ROE is a measure of financial performance, showing how well a company uses its assets to generate profit. Calculated as net income divided by shareholder equity, a high ROE generally indicates good management and efficient use of assets. For example, if Company A has an ROE of 15% and Company B has an ROE of 10%, Company A might be making better use of its resources to generate profit. It’s particularly useful when comparing similar companies.
Try this: Look up ROE for a few different stocks in your portfolio. Do you notice any patterns in performance?
- Debt-to-Equity Ratio
The debt-to-equity ratio shows how much debt a company is using to finance its assets relative to its equity. In simple terms, it tells you if a company is borrowing too much. A lower debt-to-equity ratio typically means a company is less risky, as it relies less on borrowed funds. For example, a ratio of 0.5 means the company has ₹0.50 of debt for every ₹1 of equity. A higher ratio, like 2.0, may suggest higher financial risk.
Curious? Open your favorite trading app and compare the debt-to-equity ratio of a few companies you’re interested in!
- Mutual Fund Returns and Expense Ratio
For those who prefer mutual funds, especially through SIPs (Systematic Investment Plans), it’s key to look at the mutual fund’s past returns and expense ratio. The expense ratio is the percentage of your investment taken to cover fund expenses. Lower expense ratios mean you get to keep more of your returns. For instance, if two funds both earn 10% annually, but Fund A has an expense ratio of 1%, and Fund B is at 2%, Fund A leaves you with more returns.
Thinking about SIPs? Check out the expense ratios of the best mutual funds for SIPs—see how much they could impact your returns!
Summing Up
Investing doesn’t have to be overwhelming; tracking just a few key indicators can help you feel more confident and make smarter decisions. While numbers and ratios might seem technical at first, they’re simply tools that guide you toward better investments. By keeping an eye on these metrics, you’re setting yourself up for a more informed and rewarding investment experience.
For those looking to make this journey even easier, platforms like Bajaj Finserv offer a wide range of tools, from stocks and trading apps to SIP options, all designed to simplify investing. Ready to dive deeper into these indicators? Why not check out what’s available on investment platforms like Bajaj Finserv? With the right tools, you’re set to make smarter choices and watch your investments grow!