You saw the definition of technical vs. fundamental analysis in my Short & Simple Personal Investment Tips recently in the Nest Egg Newsletter. This morning, on CBNC, I heard one announcer say “We are all technicians now”. (I didn’t see which announcer said it because I was shaving my legs while listening, utilizing a variation of my own simple tip for staying informed about the financial world!)
This is such an evolution in the decision process of deciding whether to buy a security or not, I decided to write about it today so that you know more about this basic core investing topic.
You know how there were companies that sold goods and services on the internet, and there were also strictly bricks and mortar based businesses? Now, most businesses have realized that they need at least some form of online presence, even if it is just a simple website letting customers know about their business. A norm that had been in existence for centuries changed in the way that business is being done, and almost everyone has eventually adapted the new method in some way.
Similarly, investments were analyzed using fundamental analysis, such as looking at the company’s revenue and expenses, their competition, the business model and the management. Now, however, more and more, investors and money managers are also at least looking at technical analysis to confirm what they find, first using fundamental analysis.
Recall that technical analysis uses charts to help determine the future price of a financial security; almost everyone “has become a technician”. (By the way, stock charts are much less scary than they sound!)
Why is this important to you? Because if you are investing your money in any type of mutual fund or with a financial professional, you’ll want to know what type of analysis is being used to value the securities that are being bought for with your money.
Not knowing is similar to investing in a country club membership, unaware if they have golf, tennis, or both. It’s one of the few investing basics that every financial woman will want to know to feel informed and confident about how her money is being invested.