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Is fundamental analysis the right investment strategy for you?

by , 29 May 2015

Once you decide to invest in shares, it's not advisable to pick shares at random. You need to do some research first.

One popular method for finding shares to invest in is fundamental analysis. Whilst there are varying types of fundamental analysis, they all follow similar principles.

So what is fundamental analysis? And is it an investment strategy you should consider?

Read on to find out…

What is fundamental analysis?

Fundamental analysis involves assessing the merits of a company by analysing its:

  • Trading results from the past and present;
  • Future prospects; and
  • Management.

You also need to look at the state of the economy and the conditions of the sector in which a company operates.

Are you suited to fundamental analysis?

Fundamental analysis is by no means easy. It takes time and patience to delve through all the necessary information.

Take a company’s financial statements. You’ll have to learn how to go through these looking for important snippets of information.

If you don’t know much about accounting, you’ll have to take time to learn how to do this. The good news is, thanks to standard accounting practises, once you know how to read one financial statement, you’ll be able to read any.

You’ll also have to take into account economic factors that could influence a company and its future. And the industry it operates in.

Through fundamental analysis, you want to see how much scope there is for a company’s share price to rise in the future. This will also help you to buy a share at a fair price.

Fundamental analysis can be an exciting way to research a company. Uncovering information that could lead you to make a profitable investment.

But it does require patience to learn new things and to conduct your research.

So there you have it. How to know if fundamental analysis is the right investment strategy for you.

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Is fundamental analysis the right investment strategy for you?
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