Fundamental Analysis vs. Technical Analysis | Which One Is Better?

Whenever you need to research and forecast what the future trend for the price of a particular stock is going to be, you have two methods of analysis to choose from. These two methods are the Fundamental Analysis and Technical Analysis. But what is the difference between these two analyses, and which one is better for you? Well, in this article, we will explain the concept in a brief and simplified way. So, keep on reading.

Fundamental Analysis

Fundamental analysis is the long term approach for investment, which is based on the calculation of the stock’s intrinsic value. Moreover, for the calculation of this intrinsic value, you will have to consider the various fundamental and economic factors which can affect the stock’s value.

Furthermore, some of the most important fundamental and economic factors are the revenue and income of the company. Also, the expenses of the company, the company’s growth prospects, etc. are among those factors. So, it is indicated by all these factors that the intrinsic value of a stock can be calculated immediately. However, it cannot be realized in the short term.

Technical Analysis

Technical Analysis is the short term approach for investment, which has to do nothing with the company’s real or intrinsic value. Moreover, this analysis is based on the historical activity of the company’s stock in the market. Here the factors that you will need to consider for making your analysis are historical trading prices, trading trends, trading volumes, etc.

Further, with the technical analysis, you will make use of the stock’s trend charts to figure out the historical trends and patterns of a particular stock. Also, based on those trends and patterns, you can forecast how the stock will behave in the future.

The Difference Between Fundamental and Technical Analysis

The key differences between the fundamental analysis and technical analysis are as follows:

• Fundamental analysis is a long term approach for investment in stocks. Meanwhile, technical analysis is a short term approach.
• The factors to be considered in the fundamental analysis are the ones affecting the intrinsic or real value of the company. On the other hand, you will have to consider historical trading activities as the factors in technical analysis.

Which One Is Better For You?

Now that you have clearly understood the meaning of the fundamental analysis and technical analysis and also the key differences between them, it is the time to understand which approach is better for you. Should you go with the fundamental approach or the technical approach while making your investment decisions?

The analysis you chose depends on your investment plan. If you are planning to invest for the long run, you should make a fundamental analysis before investing in any stock. Meanwhile, on the other hand, if you are an active trader and planning to buy the shares for the short term, then the technical analysis will be better for you as compared to the fundamental analysis.