CHAPTER 19
FUNDAMENTAL ANALYSIS
It is always been a difficult and a confusing decision as to which stocks to buy. The financial analysts heavily depend to the Fundamental analysis at that time.
Fundamental analysis is looking at the basic or the fundamental financial level. It helps as key to determine the company’s health and gives the idea of the value of its stock. Fundamental analysis is the cornerstone of investing. Its core objective is to do the financial forecast of the company
v To conduct companies stock evaluation
v To make projections about its business performance
v To evaluate its management
v To calculate its credit risks.
TECHINCAL ANALYSIS
Technical analysis forecasts the future directions of the prices, through past data and market trend. It ‘ignores’ the actual financial condition of the company, market currency, it just solely goes by the “charts “that is the price and volume information only. It is just not limited to charting but it also considers price trends.
Technical analysts believe that the investors collectively repeat the behaviors of the investors who preceded them. While it will take long time for the technical analyst to be picked as the one to manage your trade, but certain financial institutions and banks are using them as tools.
CHAPTER 20
FAQ ‘S
v If I buy, when should I sell?
Stock market is a creature in and of itself. When will the bull market is going to change to bear market is anyone’s guess. Hence, we should hold the shares which are stable and are moving up. When you see the company’s shares you have taken are dropping, dipping continuously, then I guess it is time to abandon the ship from those share, meaning it would be wise to sell those shares which are falling in price.
v How many shares should I hold?
If they are fewer the better it is good to be diversified, but you should hold that many share that you can manage, and handle on your own. What is the point of holding 1000 shares and If you cannot know them all… instead it’s better to have 25- 30 which are manageable.
v How can I buy and sell my shares tax efficiently?
You will be able to do this inside a self select Isa
Most of the brokers provide you with this facility where they give you an empty Isa wrapper. You have to fill it pound 7000 worth of shares and then trade tax free. All capital gains you make will be tax free.
v What are Penny stocks?
There is no set accepted definition for the Penny Stock. Some define it as stock priced under 1$ and some say 5$. They are actually type of stock that generally trades at very low value and market capitalization. They are highly speculative and have high risk due to lack of liquidity. They are generally traded over the counter (OTC) and on pink sheets.
v What is buying on margin?
A risky technique where in you are buying stocks with borrowed money from the broker. You can term it as a loan from the broker to buy the stocks. In this it allows the investor to be paid the fractional amount and the rest in borrowed from the broker. The broker sets a margin account with you and also charges you with brokerage on the loan and you have to pay interest as well. They can also hold the shares as collateral against the loan you have taken and can take the stocks, if you become a defaulter.
Interesting blog about shares and stocks which attracted me