If you have some experience in investing and you are the self-reliant type then you might have considered becoming your own stock analyst as opposed to using (and paying) someone else for their expertise. Becoming your own stock analyst could make investing more active and enjoyable, help you to save money and even improve your investment performance amongst a range of other benefits. So, how can you go about becoming a stock analyst?
Types of Stock Analysis
First, you need to understand the two main types of stock analysis; fundamental and technical analysis.
- The former is based on the assumption that stock price does not necessarily reflect the value of a business and various valuation metrics will be used to determine whether or not stock is listed at a good price.
- The latter assumes that the price reflects the available information and the price will move with trends, essentially meaning that previous performance can be used to predict future performance.
What to Research
When it comes to research, typically a stock investor will specialize in a particular industry or sector so that their knowledge is not too broad. You should then identify the key players in the industry, analyze financial statements, query customers and suppliers and possibly even engage with the company itself.
In addition to this, you should also research the company business model, financial strength, industry analysis, growth analysis and management quality. All of this should help you to gain a clear overview of different businesses within an industry or sector and make intelligent decisions.
Most of this information is relatively easy to obtain and instead it is about putting in the time to carry out detailed research. You should also analyse the forex market as a way to consider what fluctuations could occur and consider trading in this market too.
When is the Right Time to Buy?
Everyone wants to get their timing right when it comes to investing, but the key is time in the market instead of timing the market so you should not delay for too long. It is a good idea to check recent share price performance, to compare financial ratios and to consider any external factors that could impact investments – keeping an eye on the news is an important way to do this.
Becoming your own stock analyst can be highly rewarding for self-reliant investors and could even help you to improve investment performance while saving money on fees too.
Interesting related article: “What is an Investment Analyst?”