If you don't understand stock analysis, please read the post: How to Analyze a Stock.
As the title of this post implies, in this post I want to explain to you the basic principles of fundamental analysis. So, if you want to be a fundamentalist: a long-term investor, you should read this post.
When you decide to become an investor, you must understand the core and basic principles of fundamental analysis. An investor buys stocks for long-term investment, paying no attention to short-term fluctuations at all, unlike a technicalist. Also read: Basic Principles of Technical Analysis. So, what exactly is the essence of fundamental analysis?
First. Long term orientation. A fundamentalist has a long-term orientation and does not like daily fluctuations. That is, a fundamentalist seeks to "own" companies, not to trade. A fundamentalist tries to find good company prospects that can develop in the long term.
If you have the soul to become an investor, then you are a fundamentalist. But you need to remember, especially those of you who have just entered the world of capital markets, when you feel that you are a fundamentalist, you are not necessarily a true investor.
How come?
Many stock players who initially feel that they are suitable as a fundamentalist, turn out to be more suitable in the end as a trader. What is the reason? Please read the second point.
Second. Long-term analytical skills. Long-term orientation alone is still not enough, you must have long-term analytical skills. Meaning? Of course, you have to be observant in reading which companies have good prospects, which can increase their share prices in the next few years. How are the financial reports? How are the projects? How about the company's products? How the company's ability to survive in uncertain economic conditions and so on. Long-term analytical skills relate to the third point.
Third. Buying stocks whose price is still "cheap". The definition of cheap here is very subjective, because the cheapness of each person can be different from one another. However, because in the second point I wrote: "..... which can increase the price of its shares in the next few years" then you should actually be able to look for company shares whose prices are still relatively "cheap" whose prices will skyrocket in the long run.
Why should you be able to find stocks that are still relatively cheap?
If the stock price is relatively "expensive", the stock price will stagnate, so even if it rises in the long term, the increase will not be significant. In fact, what investors are looking for is long-term asset growth.
For example, if you have found a good company to invest in, you start buying shares and have an investment goal, you are still not a fundamentalist. Why is that? Read the continuation of this post: Basic Principles of Fundamental Analysis - Part II.
