Before making the investments it is highly necessary to understand for the investors if there will be a rise or a fall on the market.
When an investor chooses a portfolio manager, he has to be aware of the different methods which the managers pick for their work.
The consultant or a manager may utilize both fundamental and technical analysis to make the prediction, or he's even able to do without it - he will invest in the index fund, for example.
It should be noted while clearing the efficiency on the market.
The Technical Analysis This very first kind of analysis uses oscillators, the determines of moving averages and trend identifying techniques to understand the market and give the complementary information for the investor.
The suggested way helps the manager to determine the next movement of an index or a stock, which is based upon the past trend in the stock or index.
The technical analysis doesn't imply the theory of random walk.
The latter suggests that, the past trends in price of a stock can't be utilized for the future movement prediction.
The Fundamental Analysis This kind of analysis on the side pays its attention to the figures behind the stock price.
The fundamental analyst tries to find out the information which is taken from the company's fundamental statistics such as its balance and the capital.
It all helps to predict the market situation.
This method can be also put another way - that is the method of estimating the security which attempts to measure the outcome by studying related financial and economic factors.
The Highly Efficient Market Tips Before choosing fundamental or technical analysis the investor should review the efficient market hypothesis.
There are three forms of market efficiency: But before picking the technical or fundamental analysis the investor has to make the review of the relevant market tips.
Three forms of market efficiency exist today: * Weak form - This form means that all the prices in the past of the stock are the reflection of the present day price.
That's why technical analyst isn't to be used here to win the market.
Weak form implies that technical analysis is able to be utilized to find overvalued or undervalued stocks.
* Semi- Strong form - This denotes that all the public information is considered and taken into the value of a stock.
That's why neither technical nor fundamental analysis is able to beat the market.
According to the supporters of that form - the main reason of utilizing this form is that the only way to beat the market is to use the information hidden from the public.
* Strong form - That means that the both private and public information is already considered for the price of the stock.
So, the main tip is that even an inside-man won't have the possibility to unfold the market.
The choice of the kind of analysis depends on the investors attitude to the random walk theory and the efficiency of the market.