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Decoding the Matrix of Securities Analysis: The Secret to Smarter Personal Investment Decisions



Hey, friend!

Do you ever wonder if there's a cheat sheet to cracking the da Vinci code of securities analysis? Oh, come on. You're an entrepreneur, freelance guru, or a tech aficionado -- so, I know you've thought about it!

Today, I'll break down the grand puzzle of analyzing securities to help you make better personal investment decisions. It might just be the confidence boost you've been waiting for!


Why Analyze Securities?

First things first - don't worry. You're not required to have the pep of Jim Cramer or be a T-rex trader like Jesse Livermore. Analyzing securities boils down to knowing what you're getting into. Think of it as due diligence, much like you'd run background checks on your potential business partners.


The Duo of Analysis

Investing isn't a random roll of the dice. There are two main schools of thought when it comes to security analysis:

  1. Fundamental Analysis: This is like applying forensics to a company! You dig into their financial statements, studying the balance sheets, income statements, and cash flow. Then you estimate intrinsic values and see if the market price is a bargain.

  2. Technical Analysis: With this method, you're playing Sherlock with chart patterns, indicators, and price history to predict future price movements. It's less about 'value' and more about 'trends and momentum.'


Fun With Fundamental Analysis

Ah, fundamental analysis. It's less electrifying than a night out in Vegas, but trust me, it's no less rewarding. Here's a quick checklist:

  • Earnings per Share (EPS): This number tells you how much of a company's profit each share is entitled to. Think of it as a company's report card.

  • Price to Earnings ratio (P/E): This ratio compares the company's current share price to its per-share earnings. P/E is like measuring the popularity of the prom queen. The higher the number, the more investors are willing to pay for each dollar of annual earnings.

  • Price to Sales ratio (P/S): This ratio is perfect for companies not making a net income (yet!). It relates a company's market cap to its revenue.

  • Dividend Yield: If a company is sharing the wealth (in the form of dividends), this ratio tells you how much bang for the buck you're receiving for each dollar invested.


Tackling Technical Analysis

Technical analysis may sound like a 'Wingardium Leviosa' spell from Harry Potter, but it's nothing you can't handle. Here's a simplified guide:

  • Trend Following: If a security's price is rising, buy! If it's falling, sell! The trend is your friend until it becomes your foe.

  • Volume: Volume (the number of shares traded) adds weight to a trend. A rising market with increasing volume? Oh yeah, that trend's got some solid ground.

  • Moving Averages: These help smooth out price fluctuations to identify trends over specific periods. They’re the equivalent of squinting your eyes a bit to see a clearer pattern.

  • Relative Strength Index (RSI): This momentum oscillator measures the speed and changes of price movements. It's a handy tool for identifying potential buy or sell opportunities.


Learning Never Stops

As with every endeavour, there's a learning curve involved. But, here's to wearing failures as badges of honor. After all, Edison didn't invent the light bulb in a single go.

Now, with these tools in your arsenal, you're better equipped to dig into securities analysis. Remember, informed decision making isn't just for big Wall Street players. You, my friend, can do it too.

So, roll up those sleeves and dive in. It's time to turn insights into actions – to make smarter personal investment decisions.

You've got this!

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