Probably the most important thing to determine when buying into a position is whether the risk that comes with that security is acceptable to you, the investor. Since risk is a relative term, the easiest way to determine the risk of a security is to know its Beta. Beta is a measure of projected volatility relative to the overall market. You can find a security’s Beta at Yahoo! Finance.

Beta compares a stock’s volatility to the overall market’s. At 1.0, a security will match the market’s movement. At a Beta of 3.0, that same security will move 3 times more than the market will. So, if he market rises by 2%, the security with a Beta of 3.0% will rise by 9%.

A second important statistic is the Price to Earnings ratio (PE Ratio). A PE ratio tells investors how much a particular stock price is vis-a-vis its earnings. So, if you are looking at a PE ratio of 6, you are paying $6 for every $1 in earnings that the company generates. This alone tells investors very little. However, if the stock you are looking at has a PE ratio of 6 and all of that company’s competitors have shares with PE ratios in the 30′s range, then you need to find out why (there is a reason).

A final ratio that investors need to be familiar with is the Earnings Per Share (EPS). This simply tells investors how much each shareholder’s share of the revenue is for each share that they own. Again, this alone will not be a determining factor on whether to purchase a share, but when compared to competitor shares, it should provide an indication as to whether an investor needs to tread more lightly and do some more digging.

Beta, the PE ratio and EPS alone do not tell investors whether or not to buy a share. The point in this exercise is to do some digging and in most cases, one of these will prompt the investor to do exactly that. And by spending more time on the financial statements and accompanying notes, the more the investor will know about the company he or she is considering buying into. And with this, there will be a lot less trading stress and regret.

Chris is the founder of the Mutual Fund Site, a site that aims to help people determine Where To Invest.