Personal Money Management 101

Picking Stocks and Shares


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  • Stock prices depend on both:
    • fundamentals - current and future projections of growth and income , and
    • sentiment - unquantifiable investor emotion, ie fear and greed.
    • Markets are generally efficient (ie correctly priced), but anomalies can and do occur.
  • Fundamental Analysis
    • Picking stocks & shares from the analysis of fundamentals such as the world & national economy, industry sector and individual company's accounts and performance.
      See Fundamental Analysis (from Wikipedia)
  • Technical Analysis
    • Picking stocks & shares from the analysis of charts (ie graphs of price movements, usually against time.
    • Technical analysts (or chartists) believe past price movements and patterns are a key to the future direction of prices.
    • Chartists look for patterns such as head and shoulders or double top (or bottom) to predict future prices.
    • The merits of technical analysis are heavily disputed, but
      • it is used, especially in short-term trading, and thus patterns and trends may become self-fulfilling prophecies;
      • it can provide a graphic illustration of market sentiment.
    • See
      Technical Analysis (from Wikipedia)
      An introduction to Technical Analysis (from Investopedia.com)
      Technical Analysis from A to Z (from Equis International)
  • International diversification
    • Investing in international economies reduces risk from local recession; but
    • Adds risk from currency fluctuation.
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