What is Fundamental Analysis?
Fundamental analysis is a type of analysis you could use to identify the companies or stocks you want to invest in. Fundamental analysis takes into account multiple factors and how they may influence the company’s future growth prospects, to see if the company is overvalued or undervalued.
There is no way to accurately predict how a stock would perform, but fundamental analysis is a good tool for investors to choose companies to invest in.
What are the factors considered during Fundamental Analysis?
Some factors that are evaluated during fundamental analysis are related to the company, and are available in the company’s financial statements – like its revenue, profit, profit margin, Earnings Per Share or EPS, Price to Earnings ratio, etc.
Some other factors relate to the economy, like its growth rate, the rate of inflation, government policies, etc. You should be familiar with most of these terms since we’ve talked about them in the past.
Why should someone use Fundamental Analysis? What are the advantages?
Fundamental analysis doesn’t focus just on short-term trends. It takes into consideration past, current and future information not just about the company, but also the sector in which it operates, and the economy as a whole. Therefore, it provides the most well-rounded picture about the company’s future, and the best forecast of its stock price.
Are there any disadvantages of Fundamental Analysis?
One disadvantage of Fundamental Analysis is that it might be time consuming. However, if you’re a long term investor, a few extra hours isn’t a lot since you’ll reap the benefits for years to come.
Who should use Fundamental Analysis? Does it need any special skills?
Any investor wanting to invest in the stock market for the long term should use fundamental analysis. It doesn’t require any special qualifications, and the information required to perform fundamental analysis is freely available on financial websites.
Is Fundamental Analysis the only type of stock analysis you can perform?
No, there is another type of analysis called Technical Analysis. Click on the video about Technical Analysis on your screen to learn more.
Podcast: What is Fundamental Analysis and Why Should You Use it
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
Everything you need to know about Fundamental Analysis: What is Fundamental Analysis, What are the factors considered during Fundamental Analysis, Why should someone use Fundamental Analysis – what are its advantages, Are there any disadvantages of Fundamental Analysis, Who should use Fundamental Analysis, Does performing Fundamental Analysis require any special skills, Is Fundamental Analysis the only type of analysis you can perform, and more.
Show notes and transcript at: https://www.easypeasyfinance.com/what-is-fundamental-analysis-and-why-should-you-use-it/