Wednesday, 21 October 2015

MONEY MATTERS : WHAT TO EXPECT WHEN YOU INVEST USING FUNDAMENTAL ANALYSIS


Firstly, this helpful information from Investopedia: Technical analysis and fundamental analysis are the two main schools of thought in the financial markets. As we've mentioned, technical analysis looks at the price movement of a security and uses this data to predict its future price movements. Fundamental analysis, on the other hand, looks at economic factors, known as fundamentals.

Both ways involve stock market investing and each has its own pros and cons. Now, let's answer the question head on: 

Fundamental Analysis (FA) is great for people who don't have the luxury of time. This is in contrast with Technical Analysis (TA). Since FA looks at more objective factors {sustainability, growth, etc.}, people can make sense out of it rather than TA which is driven mostly by sentiments. Also, there are resources out there that suggest which stocks to buy based on their case studies {coupled with proper caveats, of course}. Good examples are Bo Sanchez's Truly Rich Club {TRC} and COL Financial's Fundamental guides.

For a 5-year time horizon, gains are pegged, at most ~40%. We want quick gains, well, who doesn't? However, we have to be realistic when dealing with stock returns. This percentage is based from 2011 to 2015's study from TRC. In short, we have to be patient and take on all the volatile movements for the time being. Take comfort by the fact that 40% is way higher than the PH inflation so in a way, we're still in a good position.


Make it a point to invest regularly. It doesn't matter whether you're investing Php 500 or Php 50,000. Or whether you do it weekly or monthly. The plot is to revisit your portfolio and stick with your game plan. Some call this dollar-cost averaging or to make it local, peso-cost averaging.

Suggested % on your portfolio is 20%. You want to manage your exposure to a specific stock and so it's best to set a maximum investment percentage on your portfolio. Again, 20% is just a general number but feel free to assess whatever works for you.

Hope you find this post helpful. -CMK
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