Online Investing FAQ
Here are some of the frequently asked questions and our answers about online investing faq.
Q: What is Fundamental Analysis?
A: Fundamental analysis is the assessment of the underlying forces that affect the economy, industry groups, and companies. The goal of fundamental analysis is to derive a forecast and profit from future price movements of financial securities.
At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy.
To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast its future value. If fair value is not equal to the current stock price this analysis indicates that the stock is either over or under valued and the market price will eventually move towards its fair value. Fundamental analysts look to capitalize on perceived price discrepancies between the market value and the fair value of financial instruments like stocks and bonds.
Q: What is the difference between online investing and trading?
A: Investors purchase Stocks, ETFs, Mutual Funds, Commodity Futures, or Options with the intention of holding for an extended period of time, usually several months to years. They rely primarily on fundamental analysis to make their investment decisions. Those investing in stocks consider themselves as co-owners in the companies in which they buy shares. Some investors use options to reduce risk by hedging or leveraging their investments.
On the other hand, Traders usually try to profit from short-term price volatility of Stocks, ETFs, or Commodity Futures with trades lasting anywhere from a day to several months. Most traders use use some type of technical analysis in their trading. Some traders use options to reduce risk or leverage their positions.
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