What is Fundamental Analysis?

The Short Version:

Fundamental Analysis is a method of measuring a security’s intrinsic or fair value by examining related economical and financial factors. Everything that can affect the value of the security can be analysed in Fundamental Analysis. This may include everything from the macroeconomic factors like the industry’s direction or the general state of the economy like interest rates, all the way to microeconomic factors such as the company’s management.

Effectively, the aim of the analysis is to determine whether the security like a stock is underpriced (a good buy) or overpriced (time to sell / wait before buying!).

In contrast, in Technical Analysis the focus is more on the historical data of changes in price or volume of a traded security.