MYTH-17. INDEX-BASED STOCKS AND STOCKS WITH LOWER P/E ARE SAFE
· Some stocks are in the indices merely because they are the largest in terms of market capitalization.
· Every stock is exposed to the same forces and sentiment that govern the broader markets.
·
While the PE
ratio is used to evaluate stocks, it should not be considered in isolation.
·
A company with a
higher earnings growth and better operating performance would be justified in
having a higher valuation.