A piece from India Infoline covers the basic math every stock market investor should probably understand. I read through it this morning and mostly nodded along. There is a handful of formulas worth knowing, and none of them require a finance degree.

I will walk through the ones I think matter most, in plain English.

Compound Annual Growth Rate (CAGR). For my money this is the single most important number in investing. CAGR tells you what your annual return actually was over a given period, smoothing out the good years and the bad. The formula is straightforward: take your ending value, divide it by your beginning value, raise that result to the power of one divided by the number of years, then subtract one. If you put in $10,000 and ended up with $25,000 after eight years, your CAGR is about 12.1 percent. That is your real return. Not the best year, not the worst. The steady annualized truth.

CAGR is the number I check when I want to know whether my overall strategy is working. The portfolio average over time, which is the only honest measure.

Price-to-Earnings Ratio (P/E). Divide the stock price by annual earnings per share. A stock trading at $100 with $5 in earnings has a P/E of 20. Whether 20 is reasonable depends on the sector, the growth rate, and historical norms. A P/E of 15 might be expensive for a slow-growing utility and cheap for a tech company expanding at 25 percent a year. Context is everything with this one.

The India Infoline article covers several other formulas, including the debt-to-equity ratio, return on equity, and dividend yield calculations. All worth knowing. I would add one they did not emphasize enough.

Position sizing. How much of your portfolio should any single stock represent? My rule, learned the hard way over the years, is no more than 5 percent in any one name. For index funds and broad ETFs you can go higher because the diversification is built in. Individual stocks carry individual risk, and the math of recovery is brutal. Lose 50 percent on a stock and you need a 100 percent gain just to break even. That is not a typo. Half gone means you need to double what is left.

People get excited about finding the next big winner. Nobody talks about the math of digging out of a hole. I spend more time on the second problem because it is the one that ends retirement plans.

One concept worth mentioning is intrinsic value through discounted cash flows. It is a useful exercise, I have done it. But the output is only as good as the assumptions you feed into it, and small changes in your growth estimates or discount rate produce wildly different valuations. Use it as a sanity check, not a certainty.

If we were sitting across from each other with a cup of coffee, here is what I would tell you. Learn the formulas. Understand them well enough to use them. Then remember that the math is a tool to support discipline, not a replacement for it. The investor who knows every formula and still panics in a correction will underperform the investor who knows basic arithmetic and stays the course for thirty years.

I am not a financial advisor, and nothing here is professional advice. Just perspective from someone who has been making mistakes and paying attention to the numbers that matter for a long time.