Warren Buffet, one of the most successful investors in the world, once said that “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.” This quote has been an impetus to invest for many who were interest in stock investing but were unsure, and it also, no doubt, gave a boost to the concept of stock research.
Technical analysis involves the study of a firm’s stock price. It includes such things as the stock price high, low, close, and volume. This approach is of questionable worth for the following reason.
Stocks follow the same concept as time. Time never remains the same; stocks never remain the same. Stock prices fluctuate (whether they deserve to change or not). The intensity of the fluctuations can be strong or weak, but the movement is there. Time never stands still, and neither will stock prices.
This movement does not necessarily carry any real or useful information. In fact, in our opinion, over short periods of time, it carries very little real information or insight. And studying it is of dubious worth. In other words, technical analysis is of questionable worth.
Fundamental analysis involves analyzing a company in a much more in-depth and real way. Fundamental analysis involves studying a firm’s financial records and trying to determine a firm’s true ability to generate cash profits, and then valuing it accordingly.
In a way, the difference between technical analysis and fundamental analysis is difference in perspectives. Technical analysis involves trying to determine the value of a company based on what other people think, and fundamental analysis involves trying to determine the value of a company based on what you think. It is always best and very reassuring to trust your own ability, skill, and opinions.
Stock Research Sites
There are numerous good stock analysis sites, or Stock research sites, available online. Most of the Stock research sites give you details of a firm’s stock price fluctuations in a mechanical or inconsequential way (i.e. they inform you about a stock’s price opening, closing, high, low, or the returns that particular stock has earned over a period of time).
In other words, these sites provide information that covers technical analysis. Therefore, in our opinion, they are of secondary importance and of limited use.
It is much better to patronize the sites that base their assessments on fundamental data and sites that employ fundamental analysis. These are the sites that are trying to understand and value companies in a real way.