So you want to get some skin in the investing game…but in such a big marketplace, how do you choose what stocks to invest in?

When you think about analysing stocks, you’re probably picturing a bunch of dudes in suits holding briefcases, looking at complicated graphs, and talking about “PE ratios” and “market cap”.

Thankfully, today you don’t need to rely on dudes in a suit with a briefcase to learn how to analyse stocks to be a gun at investing.

You just need to be willing to give it a crack.

But before choosing the stocks you want to invest in, you’ve gotta make sure you have all the information you need.

There’s two main methods of stock analysis which are called fundamental analysis and technical analysis.

Don’t let the words intimidate you though - they’re not that scary.

Fundamental analysis:

Fundamental analysis is all about looking deeply into the company you’re thinking to invest in at - at the most basic financial level.

Think of fundamental analysis a bit like going on a first date:

• Tell me a bit about yourself? (ie the company’s back story)
• What are your passions? (ie the company’s vision)
• What are your plans for the future? (ie the company’s growth trajectory)
• What are your values (ie the company’s culture - which can be hard to see from the outside)
• What have you done with yourself over the past few years? (ie a company’s historical performance)

Once you’re satisfied that the initial questioning stacks up, you may move into more detailed investigating. This might mean studying a company’s financial reports and using financial ratios to see if their financials stack up.

This method is ideal for long-term investors.

Technical analysis:

Think of technical analysis more like a game - a lot of it is about timing.

Investors who use technical analysis will analyse the stock’s price history and make predictions on how the price will move in the future.

Technical analysis is usually relied on more for short-term investments and more experienced investors.

But, because technical analysis doesn’t look at a company’s finances or profitability - it’s important to not use it on its own to make investing decisions.

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This is part one of the three-part series, “How to analyse stocks”. Slide on over to part two which is all about fundamental analysis.