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What is Fundamental analysis

What is  Fundamental analysis

What is Fundamental analysis

Deepak Sharma 31 May 2021

Do you also want to dive into the stock market and gain profit? And you're planning to invest your money in stocks.
Well, If you're going to make money in stocks, then you have to do the same amount of research as you're buying th
e business itself.

There are two ways of analysing a stock

1. Fundamental analysis

2.Technical analysis

Fundamental analysis tells you how a company is fundamentally strong. Strong here mean the qualitative and quant
itative aspects of this company which tells you that the company is strong enough for the long term. It helps you ana
lyse the fair purchase price of a company compared to its intrinsic value. The inherent value is nothing but the future
cash flow; this company that can generate technical analysis helps you take short-term calls using historical data. H
ence fundamental analysis can help you analyse and buy a stock that would give you good returns in the long term.
At the same time, technical analysis would help you grab short-term trading opportunities—this what you would con
centrate on introducing fundamental analysis to you.

Goals of fundamental analysis


1.predicting the future price movement of the shares and stock
2.Determining the fair value of the stock
3.Management evaluation of the shares
4. Analysing company's financial strength by the stock and shares values
5.Determining a company's ability to beat competitors


What is fundamental analysis?


It's the fundamental analysis that helps you pick a stock for the long term and by a long time here with me where inv
estment duration is more than five years based upon the category in which this doc lies. The period of stock investm
ent should be further extended, for example, investment in a small share. The stock should be for a longer duration t
han a large-cap stock as the small-cap company would need time to Scale up to the level of a large-cap company, an
d this calls for a still longer investment duration. We know that one should align his goals to the right investment ve
hicle. If he has to reach their goal, certain factors will influence which investment vehicle you ultimately choose thes
e factors. Those are your investment Horizon for this goal, your current Financial. Your risk profile and your returns
expectation, but when this investment vehicle is stock. Another factor that would influence the returns you ultimatel
y get is the price at which you buy this stock. You might find a good store, but a reasonable purchase price translates
into good returns. Fundamental analysis helps you here. Allows you to find a fair purchase price of a stock. Fundam
ental analysis involves analysing quantitative and qualitative aspects of a company. Qualitative elements cannot be
measured but can be sensed from news related to the company management interviews Etc. A qualitative part would
involve knowing things. Like what is the management team? What is the experience education capability to run the
business Etc? Does the company protect the interest of minority shareholders? What are business ethics The compan
y follows? Other promoters involved in unfair activities like increasing share prices Etc. Do they favour friends, rela
tives Etc? All these activities wouldn't be in favour of the company in the long term. So all these should be avoided.

You should know about the people who have a significant shareholding in the company. You should know about the
corporate governance of the company, as the appointment of directors organisation structure transparency and all thi
s etcetera. So this list could go on and on, but you have to sense these all qualitative aspects, as we discussed earlier
from the news related to the company management interviews Etc. The quantitative aspects of the company involve
studying the profit and loss statement of the company, its balance sheets and your reports cash flow statement, whic
h helps you analyse the profitability of the company, its debts margin financial ratios Etc a company, which is vital i
n terms of quantitative as well as qualitative aspects would show steady growth in a long time generating good retur
ns for its investors.

You've to be very picky if you find any fault in criteria followed by the company and paperwork while buying share
s or stocks. Fundamental analysis is the essential thing you should do before investing your money and choosing any
store. Some private websites and organisations provide you with a fundamental analysis of every company present i
n the market, and you can have a broader look at their assets, stocks, and shares value before injecting your money i
n. If you know the company fundamentally, it will benefit you in the long term with good returns as you can trust th
e company and owners. It lowers the risk of your money getting drowned in this flood of the market. So, it is always
an excellent choice to analyse and study properly before investing because " precaution is better than cure."

Thank you 

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