Updated on March 20, 2023
Knowledge of fundamentals is essential to any subject and so is it for market participants. Markets are inherently volatile and thus, study of fundamentals is important for developing a deeper understanding to benefit from investing. In the context of stock markets, the study, analysis and research of a stock, which includes market basics and company essentials for arriving at the investment decision is known as study of fundamentals. Study of Fundamentals includes both qualitative and quantitative information about a company, stock, security, currency, commodity, country, economy etc. Fundamentals help in evaluating performance as well as assigning a value to the subject of study. It helps in establishing if an asset is likely to be a good investment in future.
What are the key features of business fundamentals?
Key features of Fundamentals are:
1. For a company or business, details regarding its revenue, profitability, assets, liabilities, cash projection and future growth are covered under fundamentals.
2. Fundamentals are also helpful in ascertaining the financial health and stability of a business.
3. Fundamentals can include short term as well as long term factors, macroeconomic indicators, government policies, global scenario etc
4. Investors give a lot of importance to fundamentals of a share.They make their decision to invest based on this study. They make changes to their allocation only if there is a change in the fundamentals of the share or the company.