Some important concepts relating to Fundamental Analysis
1. Fundamental Analysis: What is it? Fundamental analysis is the study of analyzing the economic aspects of a business, industry, security, or commodity. It is primarily done for investing purposes, but may also be applied to analyze stocks, commodities, bonds, etc. Fundamentals are analyzed using the following formula: P/E Net Income ÷ Average Price Per Share The P/E ratio is the price-to-earnings ration. It compares the current market value of a company's stock (the price) to how much those shares (shares outstanding multiplied by price per share) would cost if they were sold on the open market. If the ratio is high, then investors expect the company's earnings to increase over time. 2. How does it work? To determine whether a particular investment is worth buying based on fundamentals,
1. Fundamental Analysis Fundamental analysis is the first stage of analyzing stock data. Fundamental analysis analyzes the fundamentals of a company, including things like its financial statements, market cap, earnings, revenue, etc. 2. Technical Analysis Technical analysis is what most traders do after they have done fundamental analysis. Technical analysis involves using charts to analyze past prices to predict whether future price movements will follow certain patterns. 3. Market Cap Market cap is simply the total amount of money a company is worth. A high market cap means that a company's value is high; while a low market cap means that a companies value is low. 4. EPS (Earnings Per Share) EPS is calculated by dividing net income by the amount of shares outstanding. If the number is gr
1. Diversify your holdings When investing in stocks, the idea is to invest in many different companies in different industries. When a company goes bankrupt, investors lose money; however, if they diversify their investments and hold shares of several different businesses, they will not lose everything at once. By holding different types of assets, the chances of losing money decreases significantly. If a company fails, the shareholder may only lose money invested in that particular company, while still being able to keep their investments intact. 2. Don't put all your eggs in one basket If someone were to put all of their money into one investment, then when that investment loses value, they will have no other way of getting back what was lost. Instead, they should spread out their funds