Investing: Fundamental Analysis
October 17, 2007 by Miranda Marquit
Filed under Investing
When it comes to investing, it is a good idea to determine what sort of analysis you will use in order to decide what to buy, hold and sell. Discipline is a key to successful investing. There are two main types of analysis: fundamental and technical. Each has their merits. Today we will look at fundamental analysis.
Fundamental analysis
This is a type of analysis in which you look at the fundamentals of a stock, index, fund, REIT, bond, currency or commodity. No matter what you are looking at, you study the underlying factors that affect whatever it is you are investing in. In the case of a stock, you would look at the company. Is the management competent? How is the cash flow? Is there room for future growth? If the answers are positive, this a company with solid fundamentals that could make a good investment choice.
Fundamental analysis works well for investors with a lower risk tolerance. It allows them to make solid choices that are likely to be compatible with a long-term buy and hold investing strategy.
Comparing with technical analysis, I feel that fundamental analysis is a little bit overwhelmed and not easy to learn. However we have no choice but have to learn this skill as it is very important to choose the right investment target