Investment Management Tips

Investment is a process that requires the investor to make detailed analysis of where he is putting his money and what the expected and desirable goals are. Knowing about the market and what prompts it to rise or fall are important. For an investment manager there are two ways to doing market analysis - Fundamental Analysis and Technical Analysis. Some prefer to use only one of the two while others make use of both. There are also those who make use of none (be advised that this is the most risky mode of investment management). Let us look at both ways of investment.

Fundamental Analysis: As the name suggests, fundamental analysis is done on statistics that lie behind the stock prices. Figures such as company's growth rate, liquid assets, business etc. are taken into consideration for the calculation. These details help evaluate whether the company is expected to make profit in the times of come and whether their stock prices would increase or not. Another way to look at the same is to study whether it is safe to invest in the company under question. Good thing about this procedure is that it allows predicting if the stock prices are going to rise or fall in the times to come.

Technical Analysis: Technical Analysis does not go into extreme details as in the case of fundamental analysis. This is based on the general market trend and is determined by keeping a close watch on the way the average is moving. All results are formed by taking into account the past experiences of the company stocks with respect to the overall market. Do not interpret it to be just random talk. A lot goes into this type of management too and the outcome is accurate to a large extent. Past trends can be very helpful in predicting the future.

The next question is how one knows which of the abovementioned method of investment analysis to choose from. Before selecting any of the two, the investor has to know about market efficiency hypothesis. 3 types of market efficiency are under existence today:

Strong Form: Under this form, both the public and the private information have already been used to value the stocks. As a result, even those who work for the company and have access to all information cannot bring about a drastic change in the market.

Weak Form: Weak form is when the prices of the past are a mare reflection of current prices. As a result, it is very hard to determine the future on the basis of technical analysis. However, the method can be used to evaluate stocks which are either over or under valued. The best bet here is to use fundamental analysis.

Semi Strong Form: Public information is used to value the stock which is why neither of two modes can be used to reach the goals. The only way to make profits is to use information which is hidden from the eyes of the public and can be used to make future predictions.

As an investment manager, deciding which form of analysis to use would depend on none other than you yourself.