Fundamentals v/s Technicals

Investing is a choice-making task, one has to choose on where and how much to invest. Equity is a very opportunistic investment option, but it can bring with it a decision making equation of whether to look at fundamentals of a stock or its technical’s.

Fundamentals determine the health of the company, whether the company is doing well, it has enough working capital, there is good cash flow, the price to equity ratio is not very expensive, the forward earning is tempting and so on and so forth.

Technical’s is the volume and the stock price, historic charts and nothing beyond that.

A big price swing in a short time is not ruled out, however when the dust settles down the stock normally moves back to a fundamental price.

When a stock takes a beating, it may not be due to fundamentals turning worse, more often than not it is the external environment which lead to negative breadth for the stock price.

Doing the fundamental analysis before investing is a good practice as a fundamentally sound stock tends to always give decent returns in the long run. Having said that one should also exploit any technical bust in the stock price.

Never ever invest on half-baked analysis.