| This requires considerable amount of time and effort to research and identify opportunities. You should ideally take help of a good advisor who can guide you. However do not blindly trust the recommendations. Any recommendation given by your advisor must be backed with solid reasoning. If you do not understand the reasoning, do not invest. That’s also a test for a good advisor. A good advisor should be able to provide solid reasoning for any recommendations given by him which will demonstrate, he has done his homework well. |
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| There are two kinds of tools advisors use to identify opportunities – use fundamental analysis framework involving economy analysis, sector analysis and company analysis – understanding business models, do SWOT analysis, competitor analysis, track record of management team, business prospects and then doing forward projections about likely earnings – based on that fair share price is arrived. If the current market price is undervalued then BUY call is initiated or if the price is overvalued then SELL call is initiated. A good advisory firm has a team of research analysts who are continuously looking for opportunities in different sectors. They also keep tracking the company, monitoring it and evaluating if the current investor should stay invested or exit and book profit. Likewise after having done their homework – they are able to guide their investors efficiently. |
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| There is also a second tool in the form of Technical Analysis which advisors use to find the right time to BUY or SELL. Technical Analysis rely on statistical tools and models to initiate recommendations in different stocks based on the rate of change in their price, volumes, magnitude of directional movement etc. They use many advanced statistical . concepts to initiate recommendations. Fundamental Analysts also rely on Technical Analysis for deciding suitable BUY and SELL points. |
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| Stock Trading which is different from Investing also relies primarily on Technical Analysis methods. |
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| So the key for you is to identify a good advisor who can help you identify good opportunities and also explain their rationale to you in easily understandable language. If you do not understand the rationale given, you should not invest or trade and if the advisor himself sounds unconvinced – you should look for alternate opinion. But invest only if you understand. |
