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Fundamental and Technical research both are the process of evaluating a security in their own respective ways. These research processes helps an investor and any other interested party to study the different aspects of a security before investing. You should remember that you need to make a good research of the share market before you wish to invest your money. Let us now through a light on some points that differentiate Fundamental research from that of Technical research. So let us have a look at the difference between fundamental research and technical research.
A method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies).
The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price in hopes of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short). This method of security analysis is considered to be the opposite of technical analysis. Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security. When you go for investing in the stock market, do have some knowledge about NSE, BSE, NASDAQ…etc.
For example, an investor can perform fundamental analysis on a bond's value by looking at economic factors, such as interest rates and the overall state of the economy, and information about the bond issuer, such as potential changes in credit ratings. For assessing stocks, this method uses revenues, earnings, future growth, return on equity, profit margins and other data in order to determine a company's underlying value and potential for future growth. In terms of stocks, fundamental analysis focuses on the financial statements of the company being evaluated.
It is the method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Technical analysts believe that the historical performance of stocks and markets are indications of future performance.
In a shopping mall, a fundamental analyst would go to each store, study the product that was being sold, and then decide whether to buy it or not. By contrast, a technical analyst would sit on a bench in the mall and watch people go into the stores. Disregarding the intrinsic value of the products in the store, his or her decision would be based on the patterns or activity of people going into each store.
Mixed use of fundamentals and technicals:
Anyone who has relied on "hot" news or company fundamentals to buy a stock knows that this practice often leads to disappointing results. The reason is simple. Fundamental analysis data lags the market. Earnings news can be as much as over a month old when released. In the majority of cases, by the time news announcements are made, the stock has usually already made its move. You should know about the importance of nifty trading.
Also, what if the fundamentals change? Most fundamental investors maintain the belief that it is better to hold onto a stock through thick and thin and hope the company recovers once better times return. But as we saw through the 2000 – 2002 bear market correction and all bear markets before it, this approach can lead to complete disaster. The continued popularity of the traditional buy-and-hold strategy is due in no small part to the 18-year bull that ended in 2000. During this market, the buy-and-hold approach to investing worked great, but then so did throwing darts. It was only when the market turned to a bear that the fundamental flaw in this method became obvious.
So, you have come to know the difference between fundamental research and technical research.
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