If you want to start investing like a professional, at some point you need to move away from an ETF or an all-market index fund and start growing your investment portfolio. Although it’s not a walk in the park, you can do it with a little bit of knowledge.
If you want to learn how to do this properly, you’ll have to learn how to do a fundamental analysis.
Before you start investing, you have to first figure out the underlying fundamentals that are driving a company and their stock. A fundamental analysis will enable you to see the bigger picture by analyzing firm-specific data.
This approach is much better than just looking at the technicalities in a market chart. A technical analysis just looks at the price action over a period of time to identify patterns. But a fundamental analysis, on the other hand, looks at things that can be considered to be more qualitative.
So what you will have to look at the following items:
You can even conduct this analysis on investments that aren’t companies. For example, you can look at the global supply and demand of a particular commodity. Or if you’re trading currencies, you can consider the local and global political situation that can have an impact on the currency.
Further, you can even look at economic factors, weather, and geopolitical events that can affect your investment. If you just focus on a technical analysis, you might miss the big picture with other variables that can impact your investment.
When you’re dealing with your personal investments, knowing when to sell is just as critical as knowing when to buy. Knowing when you shouldn’t sell goes without saying.
Keeping track of the fundamentals can help you decide when to act. Sometimes when the market is down, you can easily panic and decide to sell along with everyone else. But if you look at the fundamentals, you might decide not to follow the masses and hold on to your stock.
Having said that, sometimes you have to sell, but it shouldn’t be driven by fear. If the analysis tells you that it’s a good move, then you should sell.
The bottom line is all about making good informed decisions. The best way to do that and move forward is to look at the fundamentals.