There is some merit in using fundamental
analysis when searching for companies in which to invest. This will
help us to invest only in "quality" companies that should be able to
stay around for the long term, and which should be able to produce
acceptable returns on an ongoing basis.
BUT! there is
a limit to how much we can rely on fundamental analysis. Many
people used nothing but fundamental analysis during the GFC period
Financial Crisis of 2008-2009), and
look at the results! Some people lost a significant portion of their
Some of the more successful investors use
5% and 50% fundamental analysis for their investing decisions.
Technical analysis (charting)
Now before the uninitiated laugh and scoff,
worth reading (and it really has nothing to do with tea
that Technical Analysis
is the study of price charts in anticipation of future price movements.
It can be said that price charts do reflect the mood and sentiment of
the share market, and they also reflect all known news about the
company (well, almost all "known" news).
Many technical analysts (chartists) who
analysed the market and properly followed proven strategies during the
GFC of 2008-9 actually
profits during the down turn when others were making losses. So, there
is a great degree of merit in Technical
Analysis. Some of the more successful investors/traders use
50% and 95% technical analysis for their investing
Logical conclusion - Funda-Technical
It seems most sensible that a combination of
Fundamental Analysis and Technical Analysis could be very beneficial -
let's call it Funda-Technical Analysis.
The "Funda" comes first, because it is the first thing we do in this
process, and the "Technical" comes second because we apply this
analysis to the stocks in our watchlist that came out of the
Some people might suggest to select stocks
using charts, and then apply the fundamental analysis approach. This
really seems to be putting the cart before the horse. Do the
Fundamental Analysis first and produce the Watch List. This will not
change much from month to month; but it might change significantly in
half-yearly reporting season.