CHOOSE YOUR INVESTMENT WISELY

FUNDAMENTAL ANALYSIS COURSE

WHEN PEOPLE WANT TO INVEST IN STOCKS OR BONDS, THEY OFTEN LOOK AT CERTAIN INDECES (1) . WHEN CERTAIN INDECES GO DOWN, THEY BUY, WHEN THEY GO UP, THEY SELL. THAT SOMETIMES LEAD TO PANIC PURCHASES AND PANIC SALES. PEOPLE BECOME AFRAID WHEN THE STOCKS THEY BUY GO DOWN, AND THEY ARE HAPPY WHEN THE STOCKS GO UP. THEY BELIEVE THAT MARKETS ARE RATIONAL AND REACT TO ALL INFORMATION THE MARKET GETS. THIS MIGHT BE TRUE, BUT OFTEN THE MARKETS ARE IRRATIONAL AND REACT TO EVERY NONSENSE THAT PEOPLE DISTRIBUTE. INSTEAD OF STARING AT MARKET DEVELOPMENTS, WHAT IS THE RIGHT WAY TO IVEST IN STOCKS AND BONDS? DO NOT STARE AT MARKET DEVELOPMENTS, AND DON’T INVEST ACCORDING TO MARKET MOVEMENTS. TAKE SOME COMPANIES OF WHICH YOU KNOW SOMETHING. (E.G., IF YOU DON’T KNOW ANYTHING ABOUT TECH COMPANIES, DON’T INVEST IN THEM). THEN LOOK AT THEI INTRINSIC VALUE.

WHAT IS INTRINSIC VALUE?

INTRINSIC VALUE IS THE ACTUAL VALUE OF A COMPANY. THIS VALUE IS BASED ON ALL ASSETS, WHETHER TANGIBLE OR INTANGIBLE (2). TO MEASURE THE INTRINSIC VALUE, YOU USE THE FUNDAMENTAL ANALYSIS.

WHAT IS FUNDAMENTAL ANALYSIS?

THE GENERAL DEFINITION OF FUNDAMENTAL ANALYSIS IS THAT ITV IS THE STUDY OF VARIOUS FACTORS THAT AFFECT THE EARNINGS AND DIVIDENDS OF A COMPANY (3).  THESE MIGHT BE ANY KIND OF PROPERTY THE COMPANY OWNS. APART FROM THAT IT ALSO INCLUDES R&D (4), CHANGES AND EVENTS IN MANAGEMENT, OR MERGERS WITH OTHER COMPANIES. ALWAYS CONSIDER THE COMPANY YOU WANT TO BUY SHARES OR BONDS OF AS YOUR OWN BUSINESS. CONSEQUENTLY, LOOK AT THE CONDITIONS THE COMPANY IS IN. CONSIDER HOW YOU WOULD DEVELOP THE COMPANY. EXAMINE THE FIGURES VERY CLOSELY, AND MAKE UP YOUR MIND HOW IT WILL DEVELOP IN FUTURE.

AND LASTLY, DON’T BUY SHARES OR BONDS IN ORDER TO SELL THEM IN THE NEAR FUTURE. THAT IS SPECULATION. IN ORDER TO BE AN INTELLIGENT INVESTOR, YOU MUST BE READY TO HOLD THE INVESTMENT FOR A CONSIDERABLE TIME. AS I SAID BEFORE, TAKE IT AS YOUR OWN BUSINESS. YOU WOULDN’T BUILD UP A BUSINESS ONLY TO SELL IT THE NEXT DAY, WOULD YOU? SO, DON’T REACT ON SHORT-TERM MOVEMENTS AND EVENTS. TRUST YOUR OWN JUDGMENT OF THE FIGURES. AT LEAST, IF YOUR JUDGMENT IS BASED ON INFORMED AND THOROUGH ANALYSIS.

YOY CAN DOWNLOAD A BRIEF LESSON ON FUNDAMENTAL ANALYSIS IN PDF FORMAT AT THE BEGINNING OF THIS ARTICLE.

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  1. LIKE THE DOW JONES IN THE USA OR THE COMPOSITE OF THE GHANA STOCK EXCHANGE;
  2. SEE THE DEFINITION ON THE INVESTOPEDIA WEBSITE ( https://www.investopedia.com/ );
  3. SEE COURSE 10 – FUNDAMENTAL ANALYSIS -, PUBLISHED BY THE AUSTRALIAN SYOCK EXCHANGE (ASX; AVAILABLE AS PDF DOCUMENT FOR DOWNLOAD HERE);
  4. IBIDEM

 

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