Finance Assignment Essay Example | Topics and Well Written Essays - 750 words

Finance Assignment - Essay Example However, the performance level is crucial in determining the stock price, but it not necessary that a company that has good financial statement may be the best to invest. This is because the movement of the value of the stock price changes by the activities of the investors, so the investor needs to clearly watch the demand and supply of the stock and invest accordingly. That is way, people say that trading is require full attention of mind and is not luck game. In order to be a successful investor, one should have the quality of asset management. Now, picking a sole asset or playing only with one stock is never a feasible option. Such type of assets are called stand-alone asset and risk associated to them I the stand-alone risk (Brigham 1994 p.156). There are always chances that your value of the stock may go down and you would likely have loss or you may even win. But the probability of success is always uncertain. So most of the investors or traders advice to go for more than two assets and invest in different sectors or companies. So one should make a portfolio of assets, so that value of one stock goes down, the value of others would be might go up and the end you may not lose your money. Therefore, logically investing in securities as portfolio is more beneficial than going for stand-alone securities (Brigham 1994 p.156). ... Fundamental Analysis: Now when an investor would be looking for a company or an industry to invest, he needs to analyze its financial statements such as Income Statement, Cash Flow Statements etc and also its competitors, so that he could among them and then decide. Analyzing past trends and pattern of movement of assets should also done. All such basic analyses when selecting a security is called Analytical modeling. There are basic types of modeling, Technical and Fundamental. The Technical approach is much more simple because it mainly deals with the past trend and by looking it, calculated the expected future value of the asset. Whereas, the Fundamental approach is more studied approach and require more in-depth analysis of assets. The fundamental analysis requires more quantitative analysis involved. The investor must have the knowledge of financial statements and ratios such Earning Per Share (EPS), Sales Per Share (SPS), Return on total Asset (ROA), Return On Investment (ROI) and other liquidity r atios, turnovers etc (BuckInvestor.com). Approaches Now once you get the complete knowledge of the price movement of the knowledge, now the question of how to invest arises i.e. should the investor invest sector-wise or company-wise. In Top-down approach, the investor first looks the entire stock market, how specific industry is performing and then finally at the stock (buckinvestor.com). For Instance, I have invested in Shell Petroleum. Now following the top-down approach I would first analyze the entire stock exchange and look whether the market index points are performing. Are they closing at higher rate or not Then my next step would be to look the performance of Refinery