Fundamental analysis

From Simple English Wikipedia, the free encyclopedia

Fundamental analysis is a tool used to find out a business's performance, such as the business's assets, owed payments, and earnings. Fundamental analysis also looks at the economy and other factors, like the business's competitors, interest rates, ownership, and employment. Fundamental analysis can be done on both old and new data, but the goal of fundamental analysis is to make future predictions about the company.

There are several objectives for fundamental analysis, such as to estimate a company's current stock price, predict future stock price, or evaluate the company's management.

Analytical models[change | change source]

There are two main methods that investors can use when using analysis to find what stock to buy and at what price to buy it at.

  1. Fundamental analysis. People using this method think that markets could sell investments lower than the "correct" price, and then the investors can wait for the "correct" price to be reached to sell for more money than they bought it for.
  2. Technical analysis. Analysts look at patterns and think that the patterns can change investors' attitude on investments. Price patterns can be found because of investors' reactions to price changes. People who use this method normally review old trends to predict future prices.

Investors can use one or more of these methods to find stocks to invest in. For example, many fundamental investors use technical analysis to find when to buy or sell. Many technical investors also use fundamental analysis to find "good" companies to put money into.

The investor's belief of how the stock market works normally determines which analysis strategy they choose to use.