Certified Financial Planner John Fawaz appeared on Good Morning Tennessee Tuesday to offer some suggestions about buying stocks.-
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KNOXVILLE (WATE) - Buying and selling stock is a common way to save money and add income, but how do you know if you should be doing it?
Certified Financial Planner John Fawaz appeared on Good Morning Tennessee Tuesday to offer some suggestions.
Fawaz pointed out that people always remember the good stories of dramatic stock price growth, such as with Apple, but they sometimes ignore the risks.
He says to consider buying stock you should first think about how you want to use it. Do you want to grow the investment over a period of time, or do you want to gain income from it now?
One way to evaluate a stock is to look at its price to earnings or P/E ratio. This information is published and easy to obtain, and it's easy to understand how it works.
Stock with a higher P/E ratio means the net income is more expensive to gain compared to stock with a lower P/E ratio. That makes a higher P/E ratio a higher risk.
