MASTERCLASS Investment – Difference between Fundamental and Technical Analysis in Share Investing?

MASTERCLASS Investment – Difference between Fundamental and Technical Analysis in Share Investing?

Investment – Difference between Fundamental and Technical Analysis in Share Investing?

Investors in shares can tend to fall into 2 groups – fundamental analysis and technical analysis, but we have come to learn and to understand what benefits BOTH stock-analysis disciplines, both fundamental and technical, can bring for increased share-market investment success.

To analyse, is to measure, or to count. But to analyse well, you must measure what matters, and count what counts

It’s quite rare for a Technical Analyst (“TA”) to delve into the fundamentals of stock-picking, as this is the territory of a Fundamental Analyst (“FA”).

So, what is the difference between fundamental and technical analysis?  And how do they each help investors to make better share-savvy decisions? 

Fundamentals assess a stock’s underlying business operation and its profit-related activities/outcomes – its financial returns.  An “FA” places the business under a “financial-ratio microscope” to measure all possible issues relating to its operational profit-growth momentum and, as a consequence, its potential share-price growth.   

Technicals chart a stock’s share price upward or downward momentum.  A “TA” follows share prices in order to align investors with on-coming positive or negative price action – that is to prepare investors to BUY when share-price patterns and volume data are indicating potential sustained rising, and to SELL when charting is indicating a potential meaningful fall in a stock’s (or the market’s) share price/s.  

In a nutshell, fundamental analysis “spots” academic reasoning for business earnings growth (business profit), and technical analysis charts and “spots” buying and/or selling (investor profit) share-price trends.

Measuring what Matters and Counting what Counts 

It is only measuring what mattersthat enables investors to “count what counts”.

An investor’s ultimate count is the net-profit outcomes resulting from the timely, technicals-triggered, “when-to-buy” and “when-to-sell” trades of fundamentals -measured & identified investment-grade “what-to-buy” stocks. 

SuperBenefit’s investing/trading advisor method involves combining regular stock-market philosophies of longer-term “buy & hold” investing (fundamentals) and, shorter-term “buy & sell” trading (technicals) that will help investors construct investment-grade “quality-stock” portfolios with bullish long-term run-with-the market growth objectives, and bearish short-term retreat-to-safety cash options as time-to-time situations would warrant.  

The below schematic shows a typical range of fundamental analysis financial ratios that would be applied by a “FA” to measure and assess the operational strength and profit-growth momentum of a business.  

Fundamental Ratio Cascade Gps

A positive fundamental analysis assessment relative to these below financial ratios would point up a:     

  • Financially Healthy;
  • Rationally-Valued “Growth” Company;
  • With StandoutSuperior Management.

Want to learn the core issues of share investing?

See our slides SMSF & Shares Overview to get a quick session where you can learn to easily understand Company Financial Statements, how to find healthy companies, what Tools and Ratios to use, work on examples, and also includes how to get better investment outcomes.

If you have questions, call 0407 361 596

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Self-Managed Superannuation Service Providers in Australia. SuperBenefit will SET UP your SMSF and provide investment education for a better result. We take care of all your administration, accounting, ATO lodgement and audit of SMSFs, working with you and your advisors. If you want advice we can arrange one of our recommended advisors and accountants to meet with you, as we do not give advice, but take instruction only. Take control of your super, including property shares and other assets. Learn how to be your own advisor - make better decisions - by being mentored and coached to invest your own super wisely and strategically by qualified partners. Book to come to an event to find out more, or - Call us 0407 361 596, no obligation FREE strategy call.
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