How to Start - Picking a Stock (Fundamentally)

If you had been researching about stocks for quite awhile, you might have come across these two terms. Fundamental and Technical Analysis. What are they? What are the difference and how can i trust them to make profits?

Investing and Trading is not like Gambling. If you are someone who believes in luck and thinks that your $3000 is going to make you into a millionaire within one day, I think you are going to be very disappointed. Infact i suggest you take a hike to the Singapore pools or Genting and put your money there. Unlike gambling, Investing doesn't always let you lose all your money in one go or make a big profit out of no where. When investing you are buying other people's businesses, assets and liabilities. So for you to make a million within one day, it will take your shares to grow at least 333.33 times its current price or in other words it will have to take Golden Island, a little known private limited bunkering company in Singapore to become Exxon Mobil, the World Largest Petroleum Corporation. The chances of that happening is historically ZERO. So what really makes you want to invest and what makes you think you should invest? Now let me introduce you to the two most critically acclaim methods of investing. I say most because there are some people that still thinks investing is a gamble even after years of moving in and out of the market.

Fundamental Analysis

What do people look for when they want to plan their next holiday trip to another country? Of cause they have to understand the demographics of the country, the weather condition, the amount of money they are going to spend and of cause the kind of shelter they want to reside in. So how is this similar to picking a stock?

Like going on a trip, picking a stock also requires planning and research. The best and most usual way to do that will be through news, visiting their stores, knowing their products and of cause their financial health; which can be seen through their quarterly financial and yearly annual report. All publicly listed companies are required to publish their quarterly financial reports/Annual report on their websites or to SGX when they are released at year end. For most fundamental analyst like the Great Warren Buffet, they often make their decisions base on the company's Financial report(The methods will be discussed much later in future posts). Many news or related media will tend to also follow the companies' financial report to announce their financial standings and to make forecast on the country's economy. And of cause, a good and healthy balance sheet with little or no debts might meant that the future is looking bright which correlates to a potential increase in the share price of the company. Likewise, a negative outlook on the balance sheet will potentially reduce the share price of the company and this is how investors like you and me make their profits and losses.