Topic: How To Invest

What is Pat's commentary for the week of October 24, 2012

Article Excerpt

After making a decision, people tend to look around for facts and arguments that support their decision. They tend to disregard opposing facts and arguments. This is as true in investing as in anything else. You need to keep this in mind when thinking about your own beliefs. It also helps to keep it in mind when weighing the beliefs of other investors, both professional and non-professional. For instance, some professionals are promoting a new way of looking at P/E’s (the ratio of stock prices to per-share earnings). In the past, investors generally looked at two versions of the “e”, or earnings, in the ratio. You could divide the current price per share by the total of earnings in the most recent 12 months (often referred to as the “trailing P/E”). Or you could divide the price by an estimate of earnings for the current or next fiscal year (often referred to as the “forward P/E”). Now some analysts seem to think the…