Investing in the stock strategy - fundamental analysis

Investing in the stock strategy - fundamental analysis

All long-term investors have to carry out the company in which they invest their funds, fundamental analysis. Knowing what are some of the company's financial situation, we can make a decision to buy the company shares or preferred shares of such refuse.

The main fundamental analysis is the company's valuation. You must have some knowledge of finance and economics. Such an analysis is necessary to analyze the company both quantitative and qualitative parameters.

Quantitative analysis of the parameters is easier, because all the data are expressed in numbers and it is not difficult to compare. In turn, the quality parameters can be found in the company's reports, for example, cash flow statement or balance sheet. In the collection of data helps to determine the company's future prospects.

It is also a fundamental analysis is carried out in accordance with the relevant calculations using certain formulas. One of these formulas is the discounted cash calculation formula. This formula allows to determine the fair value of the Company.

Based on this calculation to determine whether it is worthwhile to buy some shares. If the calculation reveals that the real value of the company is greater than the value of one share, then this company's shares can be purchased. If the fair value of the company is lower than the share price, then buy such shares should be abandoned.

In general it can be said that in any case, in order to acquire the company's shares, the investor must find out what are the company's future prospects. This is necessary for an investor to maximize their profit and minimize loss.

Investing in shares is one of the riskiest investment methods. It should be borne in mind that the higher the risk not only provides a lot of profits, but also losses. So, what to do, that investing in shares to be profitable and to reduce the potential risk of a threat?

In particular, in order to recoup the investment in shares, the investor must have the economic and financial knowledge. Often, investors pay little attention to this requirement and look at it superficially, resulting in their shares become worthless securities. Of course, certain knowledge comes with experience, so making a mistake here and there, not to repeat it elsewhere.

Second, investing in stocks requires a detailed analysis, which includes three aspects: the economy, the sector and the company. The analysis of these aspects can make a decision on the inclusion of such shares in its portfolio, or to refrain from.