Before deciding where to invest in stocks lets look at how to find good stocks using fundamental analysis as this is a key part of learn trading and investing course.
What do we mean by fundamental analysis?
Fundamental analysis means extracting key information from the company’s published accounts i.e. the balance sheet, income statement and cash flow statement. The key information we shall be using is:
PE Ratio (price earnings ratio)
Institutional Ownership and
Our aim as investors is to buy shares at the right price. We don’t want to pay too much as when we come to sell it we may not get our money back and we end up making a loss.
In addition to using fundamental analysis we can have another weapon in our arsenal – we can use technical analysis. This involves reading and analysing charts, looking for support and resistance and trying to find the beat points to buy and sell.
In the next lesson we shall begin our fundamental analysis and examine a very useful ratio called the Price Earnings ratio.