STREET DOGS: Working out when it is a good time to invest in small caps
16 November 2020 - 19:30
Tom Gardner, one of the founders of The Motley Fool, once revealed that he uses three tools to determine whether it’s a good time to invest in small caps.
The first comes from Peter Lynch, who suggested you look at the P/E ratio attached to the Russell 2000 (a small-cap index) and compare it to the P/E ratio of the overall market. According to Lynch, small caps are attractive when they are trading at a multiple of 1.2 times that of the overall market or less, but unattractive at earnings multiples of two or more. ..
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