Stock Market Basics – Stock Analysis Will Make You Rich When Done Right!

 competitive position, debt to equity ratios, and many
Stock analysis, when done correctly, will change yourmore. These fundamental factors tell us about the
life! Stock analysis is one of the key stock marketcompany as a business.
basics. It will help you to turn a small amount ofThere is another type of analysis...technical analysis. It
personal savings into a quickly snowballing tradingrevolves around the strength of the industry group
account. Analyzing stocks correctly has the potentialof the stock, who is buying it right now, and how
to free you from work, debt and a feeling of "want"much they are buying, technical analysis of the stock
into one of the rare people who are trulychart, its performance over a period of time against
independent, can live anywhere in the world they likeits peer group and the market in general. Now, most
and need only to work a few hours each week. It ispeople who rely on fundamental analysis have dirty
for these reasons that many people seek to masterraincoats and big overdrafts in my experience. Many
the stock markets. Learning how to do stock analysispeople, though not all, who rely on fundamental
the right way is the first step on a liberating journeyanalysis suffer from ever increasing market swings.
of self discovery and personal fulfillment.Most highly successful sophisticated investors look at
Let me take you on a little voyage ofboth types of analysis...it's a kind of techno
discovery....jump into my time machine.fundamental analysis. The balance in this method is
What is "the right way" to do stock analysis?heavily weighted to fundamental analysis....about 80%
Simple...the right way is the way which has producedwith technical analysis being about 20% of the
the best returns over a long period of time. Theweighting. It's more important to buy good
feature I love most about the stock market iscompanies than it is to jump on great entry points in
everything is recorded! We can literally jump back inthe stock charts of poor companies.
time to great traders, high performing stocks andAs investors, we all want to have the "margin of
market conditions and learn from them. How do wesafety" which Benjamin Graham talked about. Buying
do it? We look for patterns and commonstocks in outstanding enterprises goes a long way to
denominators. Once we have those, we try andproviding this so that our downside is limited.
incorporate them into our trading.However, on its own, this isn't enough protection.
This is what Warren Buffet did. It's what Peter LynchGreat companies like Cisco have gone through
did, Jim Slater did it too, and so did Marc Faber,stomach churning corrections of almost 90%. The
George Soros, Jesse Livermore, William O Neill andmissing part here was technical analysis...buying the
Nicholas Darvas. The list could go on and on. Theybest companies at exactly the right time instead of
never took their stock market education for grantedsimply buying the best companies.
They researched why stocks behaved the way theyWhen you put both pieces of this stock analysis
did, cherry picked the winners and then went outpuzzle together, buying great companies and buying
and looked for them!them at precisely the right time, your success in the
Their first step, to a man, was stock analysis...morestock markets is almost assured.
precisely, fundamental analysis. Fundamental analysis isSo when you think about investing in or trading
about which type of stocks we choose. It revolvedstocks, use both technical and fundamental analysis.
around the company that's underneath the quarterlyKeep your overdraft low and your rain coat clean by
reports. Great fundamental analysts look at factors,doing stock analysis the right way!
like earnings, profit margins, operating profits, salesLimiting risk by selecting great entry points is one of
growth, product pipelines, management quality, thethe most important stock market basics to master.