Read the previous Part: Basic Principles of Fundamental Analysis - Part I. If you already have three points as a fundamentalist (read part I), you still cannot be said to be a true fundamentalist. Why is that? Read the fourth point.
Fourth. Tolerance to risk. There is still a connection with the third point. Suppose you buy shares for investment at a price of 250 per share. In 4 months the stock price rose to 600. You are happy. Suddenly because of the sector in the industry there is a slight shock, your stock price drops from 600 to 500, and a few months later it drops again to 400. You panic, and quickly sell the shares.
From the above case, if your mental strength is not strong enough to see the price of the stock you invest fall, it means that your tolerance for risk is low. What does it mean? That is, you are more suited to be a technicalist, not a fundamentalist. A fundamentalist has a high tolerance for risk.
Stock prices fell for a moment does not necessarily make fundamentalists panic and sell their shares. A fundamentalist with long-term analysis will still have a strong belief, that one day the company's stock price will continue to rise, despite fluctuations that make the stock price, perhaps, go down quite a bit.
With a note, the decline in the company's stock price is not due to unexpected cases, a fundamentalist must have a strong conviction and belief that the company's stock will continue to rise for the long term. Unexpected cases, for example: The company's factory suddenly caught fire, the company's operations stagnated, the debt increased. Finally, the stock price fell drastically.
Fifth. Growth investing or value investing? The essence of fundamental analysis is, you must be able to determine whether you tend to prefer an approach based on growth investing or value investing.
[Growth investing: An investment strategy by buying companies that are not yet established, but have huge potential to grow in the future. Growth investors will tend to look for stock prices that tend to be "cheap". Value investing: An investment strategy by buying companies that are already mature, companies that always lead the industrial sector, are diligent, share dividends]
So, if you want to be a fundamentalist, you must have all of the above aspects. Most stock traders feel that they are an investor, even though they only have a goal for long-term investment, without considering other aspects.
Being a fundamentalist is not easy. I admit, it is easier to be a technicalist. A fundamentalist must have an observant company analysis, and you must dare to take investment decisions, and hold your shares for years, not even selling immediately when the stock price drops.
