Tuesday, 1 May 2018

Stock Analysis

Technical and fundamental analysis are the two analysis which is highly recommendable to take a buy or sell decision on stocks.

Both play a very important role and also it has its own value in the investment decisions.

You should give 90 percent importance to the fundamental analysis and 10 percent to the technical analysis. Many people give 90 percent importance to the technical analysis and eventually lose their money.

Fundamental analysis of stocks shows you what to buy and technical analysis indicates when to buy.

i. Fundamental analysis

Fundamental analysis shows you the actual inside picture of the company. It emphasizes on the financial statement, valuation, financial Ratios, health of the business, competition and internal & external factors.

It talks about the valuation of business and stocks. A share price below valuation with strong fundamentals is considered as an undervalued stock.

Fundamental analysis focuses on long term investment, which is the best way to invest in the stock market.

Warren Buffet made a huge fortune by applying strict fundamental analysis. He never looks at the share price, he first does fundamental analysis, then check the price and compare it with his final valuation.

If the price of a share is expensive, he waits until the price to move down to the actual mark he wants.

Think of you are investing in a company who can give you a consistent profit regardless of competition and bad internal and external condition.

ii. Technical analysis

Technical analysis deals with charts and price movements. Many short-term stock investors take a buy and sell decision-based on technical analysis.

It deals with price movement and volume with the help of charts.

The short-term investors focus more on technical analysis. Long term investors give less priority to technical analysis.

Technical analysis gives you the advantage to earn money for a short term period, but it also requires active participation to get yourself updated with the latest news.

Long term investors use the short-term technical analysis only to buy the stock at a very low price and see the stock performance trend.

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