Fundamental Analysis, I trust - part 1

Fundamental vs Technical Analysis
Recently, I have a friend who wanted to start investing in the share market and asked for my advice. To be honest, I think this is definitely not the best time to enter the market (to be discussed later), nevertheless, I told him that he must first start with establishing some kind of system. This system will help him in selecting counter to buy and time to make the buy/sell decision. I further pointed out to him that there are many types of "players" in the market, but they can mainly be separated into 2 main streams: fundamental analyst and technical analysts.

Fundamental analysts are those "players" who believe that the "true value" of the company will be reflected in its share price, sooner or later. The most notable fundamental analysts includes the legendary Benjamin Graham, known as "Father of Value Investing"; Warren Buffett, "The Oracle of Omaha", and his partner, Charlie Munger who are both currently at the helm of their multi Billion investment vehicle, Berkshire Hathaway; Peter Lynch, the legendary fund manager; and many more. These are all very successful investors and are all very respectable figures in the financial world. They believe in buying a dollar with a penny and buying shares in a company will make them part owners of the company. I am a firm follower from this school of thought.

As for tehnical analysts, they put emphasize in studying the trendlines and signals in price graphs. They derived methods to predict the future movements of share price from their past. I am not good at this and hence, is not in a position to comment further.

And of course, there are also players who believe that they can extract the good points from both of these investment strategies and I will call them the hybrid investors. I have known a few people who have been very successful in doing this in real life. They use the fundamental analysis to locate good companies and they use they use technical analysis to look for entry signals to start accumulating their shares.

In conclusion, I told the friend that one must put in hard work in order to be successful in the share market, there are no easy way out. Well, of course, I do tell him, "if you believe in luck and that the share market is nothing different from a casino, then I can only bid you good luck". It goes the same to the rest of the gamblers..