Fundamental Research vs Technical Research For Stock Market

Priyanka Sharma

14 Sep 2017

Untitled Document

To gain better returns from the stock market and avoid losing money, one must research thoroughly before investing. This research would help the investor to decide where and how to invest, so as to get good returns. The research is done extensively on different parameters depending on the requirements. There are two types of research done in the stock market namely: Fundamental and Technical Research. Both of the methods serve the purpose of earning through stock market but are differently implemented and used.

Fundamental Research


Fundamental research is widely used by the investors. It is used as a beforehand analysis for long term investments. In fundamental research, more emphasis is laid on the value of the stock which is determined by analysing various aspects of the company.

In this methodology, the price of the stock does not hold much importance. Rather, the economic aspects and its effect on the company’s health are analysed. In addition to this, other important factors which could affect the stock directly or indirectly in the long term are also observed. These factors include the following:

  1. Financial Data: Financial data of the company such as balance sheets, quarterly results etc. are deeply analysed. This is to ensure the company’s performance in the long run. All the details in these documents are studied precisely so as to get a clear idea about the company. Revenue model, assets, and liabilities are also analysed to determine the company as a good or bad stock.
  2. Industry Trends: All the details related to the industry of stock are analysed. The scope of industry in future, factors affecting it and its growth rate are deeply studied. Patterns are made to predict the performance of the industry, and thereby the future value of the stocks.
  3. Market Competitions: To determine the hold of the company in the market even its competition is studied so as to make a complete evaluation. This would help in determining the strength of the company and its future growth prospects amidst the competition.
  4. Economy: The updates of the economic events are also taken into account. The economy affects the company, also affecting the future value of stocks. Thus, a proper track of economy and its effects are maintained and analysed.

Fundamental research uses the concepts of Return on Equity (RoE) and Return on Assets (RoA). The sources of the research data are mainly the financial statements. It oversees both the past history as well as the future aspects. Fundamental Research is crucial for long term investment. It is considered as a traditional approach where the value of the company remains prominent.

Technical Research


Technical Research is widely used by the traders. It is the analysis made before short term investments. In Technical Research more emphasis is laid on the price of the stock. The future trend is determined by rigorously monitoring the past values of the stocks.
A trend is determined by deeply analysing past and current value. Once a trend is confirmed, it helps in predicting near future values. Thus, a trader buys a stock at a lower rate, in an uptrend and sells off as soon as a decent price rise is observed. The factors which are deeply analysed are as follows:

 

  • Price Movements: Price movements are rigorously monitored. Patterns of trends are made using these price movements. These are used to predict fluctuation and near future prices. The stocks are not to be held for a long time. So, more emphasis is laid on the margin obtained between the buying and the selling price. This margin is optimized by using analysis made by studying price movements.
  • Market Psychology: Market Psychology plays an important role in short term price fluctuations in the stock. It is always better to analyse it to gain most out of it.

Technical Research is crucial for short term investments. It is a statistical approach where the price of the stock is prominent.

Conclusion:

 

Both the research methodologies are important to gain in the stock market. But their process and objectives remain different in the above manner, which can be used as per the convenience. To gain maximum returns, try to implement both these methodologies before you invest in a stock.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Fundamental Research vs Technical Research For Stock Market

Priyanka Sharma

14 Sep 2017

Untitled Document

To gain better returns from the stock market and avoid losing money, one must research thoroughly before investing. This research would help the investor to decide where and how to invest, so as to get good returns. The research is done extensively on different parameters depending on the requirements. There are two types of research done in the stock market namely: Fundamental and Technical Research. Both of the methods serve the purpose of earning through stock market but are differently implemented and used.

Fundamental Research


Fundamental research is widely used by the investors. It is used as a beforehand analysis for long term investments. In fundamental research, more emphasis is laid on the value of the stock which is determined by analysing various aspects of the company.

In this methodology, the price of the stock does not hold much importance. Rather, the economic aspects and its effect on the company’s health are analysed. In addition to this, other important factors which could affect the stock directly or indirectly in the long term are also observed. These factors include the following:

  1. Financial Data: Financial data of the company such as balance sheets, quarterly results etc. are deeply analysed. This is to ensure the company’s performance in the long run. All the details in these documents are studied precisely so as to get a clear idea about the company. Revenue model, assets, and liabilities are also analysed to determine the company as a good or bad stock.
  2. Industry Trends: All the details related to the industry of stock are analysed. The scope of industry in future, factors affecting it and its growth rate are deeply studied. Patterns are made to predict the performance of the industry, and thereby the future value of the stocks.
  3. Market Competitions: To determine the hold of the company in the market even its competition is studied so as to make a complete evaluation. This would help in determining the strength of the company and its future growth prospects amidst the competition.
  4. Economy: The updates of the economic events are also taken into account. The economy affects the company, also affecting the future value of stocks. Thus, a proper track of economy and its effects are maintained and analysed.

Fundamental research uses the concepts of Return on Equity (RoE) and Return on Assets (RoA). The sources of the research data are mainly the financial statements. It oversees both the past history as well as the future aspects. Fundamental Research is crucial for long term investment. It is considered as a traditional approach where the value of the company remains prominent.

Technical Research


Technical Research is widely used by the traders. It is the analysis made before short term investments. In Technical Research more emphasis is laid on the price of the stock. The future trend is determined by rigorously monitoring the past values of the stocks.
A trend is determined by deeply analysing past and current value. Once a trend is confirmed, it helps in predicting near future values. Thus, a trader buys a stock at a lower rate, in an uptrend and sells off as soon as a decent price rise is observed. The factors which are deeply analysed are as follows:

 

  • Price Movements: Price movements are rigorously monitored. Patterns of trends are made using these price movements. These are used to predict fluctuation and near future prices. The stocks are not to be held for a long time. So, more emphasis is laid on the margin obtained between the buying and the selling price. This margin is optimized by using analysis made by studying price movements.
  • Market Psychology: Market Psychology plays an important role in short term price fluctuations in the stock. It is always better to analyse it to gain most out of it.

Technical Research is crucial for short term investments. It is a statistical approach where the price of the stock is prominent.

Conclusion:

 

Both the research methodologies are important to gain in the stock market. But their process and objectives remain different in the above manner, which can be used as per the convenience. To gain maximum returns, try to implement both these methodologies before you invest in a stock.

Have Referral Code?