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How To Pick Stocks To Invest In — Fundamental vs Technical Analysis
How To Pick Stocks To Invest In
So you decided to invest in stocks.
That’s great!
Here’s the problem:
There are approx. 6,500 stocks traded at the New York Stock Exchange (NYSE) and another 3,500 stocks are traded on NASDAQ.
That’s a total of 10,000 stocks!
When I was new to trading, I didn’t know how to pick stocks to invest in.
Should you subscribe to a newsletter?
Or listen to the talking heads on TV?
Or should you try to develop your own trading system?
How Do You Decide What Stocks To Buy?
There are mainly 2 ways to pick stocks to invest in:
- Fundamental Analysis and
- Technical Analysis
In this article, I will explain both approaches and answer the question:
“Which is better: Fundamental Analysis or Technical Analysis?”
Let’s get started!
What Is Fundamental Analysis?
Here’s how to pick stocks to invest in using fundamental analysis:
Fundamental analysis means that you are analyzing the company’s “key performance indicators (KPIs)” to determine the true value of a company.
The most common used KPIs are:
- Revenue
- Profit
- Earnings per Share (EPS)
- Price to Earnings Ratio (PE Ratio)
- Market cap
… and many others.
In addition, you need to consider some other factors when using fundamental analysis to determine the fair value of a company, such as…
- The business model
- The competitive advantage
- The management team
- National or global opportunities and threats
… and the list goes on.
If you’re right now confused or feel overwhelmed — you’re not alone.
That’s why many investors listen to “analysts” on TV like Jim Cramer or Rick Santelli, just to name a few.
