Basics Of Fundamental Analysis

                               Basics Of Fundamental Analysis

If You Are An New Stock Market Investor Fundamental Analysis Is The Best Analysis Which Would Help You To Gain Profits And High Returns And Become Wealthy In Future. Well, This Investment Strategy Works Very Well And This Analysis Had Made Investors Like Warren Buffett And Rakesh Jhunjhunwala Greatest Investors Of The World. So Before Doing Fundamental Analysis It Is Very Important For You To Understand Core Philosophy And Main Objective Of Fundamental Analysis. So, Fundamental Analysis Is a Basic Analysis In Which Our Goal Is To Hold Stocks Or Shares For Long Term To Gain Returns In Future And We Have To Be Patient For Long Period Of Time Unlike Trading In Which You Try To Earn Money In Short Period Of Time. Most Of The Beginner Investors Thinks That We Can Make Money In Long Term By Only Looking At Past Return Of Stock And Only Focusing On The Price Movement Of The Stock. This Is One Of The Biggest Mistake You Could Ever Make So For Long Term Try To Avoid Only Looking At Prices. For Fundamental Analysis You Have To Mainly Focus On 4 Things According To Me:-

1). Financial Ratios.

2). Financial Statements.

3). Management Analysis.

4). Valuation.

Well, If You Are New Investors You Would Be Worried To Heard Such Complicated Terms But I Will Make It Very Easy To Understand. Firstly, If We Talk About Financial Ratios, They Are The Numbers Which Tell About The Conditions Of The Company In Very Short And Easy Way. Some Financial Ratios Easy To Understand Are Profit Growth, Sales Growth And NPM (Net Profit Margin)Which Tells Us About The Financial Stability Of Company In Short Way. Secondly, If We Talk About Financial Statements They Also Shows The Financial Numbers Of Company Like Profit And Loss, Sales And Revenue And Debt.  They Are Very Detailed But Looking At This Your 50% Of Analysis Would Be Done Itself As These Statements When Understood Properly Give You The Clear Picture Of The Company's Financials To Filter Good Stocks From Bad Ones. After That, If We Talk About Management Analysis It Is Most Important To Understand As We Only Get The Idea That Company Is Going To Make Profits In Future By Looking At The Management Who Are Running The Company. We Can Read About Management Of Company In Its Annual Reports Available On Internet To Know About The Company Whether The Management Of Company Who Is Leading It Are Honest Or Not Or Does They Actually Has The Capacity To Turn a Loss Making Company Into Profit Making?. You Could Find All These Answers In Annual Reports And This Is The Most Useful Analysis According To Me And All Great Investors Also Suggests This. Last But Not The Least Analysis Is Valuation Of Company Which I Would Make You Understand With The Help Of An Example. Suppose, If You Go To Cloth Shop And You Ask For Price Of a Shirt Which You Like The Most And The Shopkeeper Said, Its Price Is 500 Rupees Then You  Do Valuation Of Cloth That Is It Really Worth Buying At This Price And After Checking Shirt's Quality If You Find This Price Is Reasonable According To Its Quality You Buy It And If You Found The Price Of Shirt Overvalued Then Its Quality You Does'nt Buy It. Same In Stocks You Look At Stock's Financial Numbers To Understand Its Quality And Actual Value And Compare It To Current Market Price And If its Market's Price Is Less than Actual Value You Buy It And If It Is Not You Wait For Price To Come Under Its Actual Value Which You Calculate By Looking At Its Quality. Believe Me, If You Done These Analysis Properly You Could Find Stocks Which Will Give You Very High Returns And Multiply Your Money And This Is The Strategy Very Less People Will Tell You And At Last Keep Learning As In Stock Market All Earnings Come From Learnings.