With the introduction of online stock trading websites and mobile trading in India, more and more youngsters are looking to put their money to productive use. But what methods should they use while deciding on their investments?
Frankly, there aren’t a lot of options- unless, of course, you plan to rely on intuition. For the rest of us mere mortals, there are conventionally two ways of selecting your next investment. We have prepared a list of questions to help you decide which method is more suited to you.
So let’s find out what side of the fence you’re on:
What kind of investor are you
a) Fundamental Analysis
- Do you wish to find out everything you can about the company- its earnings, future prospects, sector of the economy, regulations etc. before you decide to put your money in it?
- Do you believe that good companies will ride out short-term market fluctuations and create value for its shareholders in the end?
- Are you a patient investor who has long-term goals with each investment?
- Do you pride yourself on being able to judge the intrinsic value of businesses, and predicting their long term success?
- Do you idolize the likes of Warren Buffet and Benjamin Graham and wish to emulate their investment techniques?
- Are you reluctant to indulge in futures and options trading? Do you consider derivatives to be financial weapons of mass destruction?
- Do you like reading financial/management reports?
Mostly Yes- You’re suited to be a value-based investor using fundamental analysis to base his decisions
b) Technical Analysis
- Do you first look at market trends, and then choose which company to invest in?
- Do you pride yourself on having an intuitive understanding of market sentiment, and its possible effect on share prices?
- Do you find yourself impatiently checking the market situation multiple times a day, and can’t bear to wait for the next quarterly report to make your move?
- Do your investment heroes include Marty Schwartz and Mark D. Cook?
- Are you excited by the prospect of complex financial products, such as futures and options trading
- Do you like graphs, charts and probabilities?
Mostly Yes- Technical analysis seems right up your sleeve.
If your answers were:-
Mostly Yes to both sets of Questions - There are two possibilities here:
a) You’re confused. Trying both methods well make a lot of things clearer
b) You can be one of the rare few who wish to combine the best of both worlds. Then again, some will believe that you’re trying to mix oil with water- trying to reconcile two approaches that can never work together.
Mostly No’s to both sets of Questions - Are you sure you want to invest in stocks?
In our next blog posts, we shall explore some of the basics of both methods of investment.
MyValueTrade is an online stock trading platform that combines simplicity with a choice between fixed brokerage and a per order charge. We have amongst the lowest brokerage in India