The two main approaches to deciding which shares to buy are fundamental and technical analysis. Both approaches have their advantages and disadvantages and there are many investors who choose to use a combination of both types of analysis to improve their investment decisions.
Fundamental analysis is the study of the financial data and other qualitative measures of the company and the environment in which they operate to determine the value of a company.
Fundamental analysis can be as simple or as in-depth as your experience allows. We've provided a basic overview of a few simple fundamental analysis concepts here for you.
A handy list of some of the more common fundamental analysis terms and what they mean.
Fundamental analysis is based on the idea that if the fundamentals of a company are right and the share price is below a measure of value then the share is likely to be a good long-term investment regardless of short term price fluctuations.
Download this tutorial for a basic overview of fundamental analysis if you are just getting started.
Lesson 10 in the ASX shares course focuses on fundamental analysis.
Investopedia explores fundamental analysis in a series of articles looking at both quantitative and qualitative factors.
Stockcharts has a detailed tutorial on fundamental analysis including an overview of the strengths and weaknesses.
Explore four fundamental analysis investing strategies to see if any are a good fit for you.
If you are going to use fundamental analysis, having a plan and a checklist before entering is a good idea. Check out an ASA member's stock screening checklist here and adapt it to suit your investing style.
Take advantage of the strengths of both approaches and consider combining fundamental and technical analysis to inform your investment decisions.
Investors Mutual Limited have put together a series of 20 lessons on a broad range of value investing topics. You will have to register (free) but well worth the read.
'Small caps' is the term used for companies with lower market capitalisation. Investing in the small caps is not easy and it's not a part time job.