What’s in the blog?
New to the stock market? This guide will help you build a solid watchlist using fundamental and technical analysis, so you know what to buy, when to buy, and how to stay smart with your investments.
The volatility of the stock market today gives me a rush of adrenaline. But this was never the case. Today, I just don’t trade for myself, but responsibly take care of the portfolios of our clients. But there was a time when I was a beginner, like you.
I remember the time when jargon like P/E ratio, price action, etc. gave me sweaty palms. I, too, dreamed of earning a fortune from the stock market but feared making losses. Long story short, I started from the same point where any new investor does. I know the pain points. I know the aspirations and fears.
So, in this blog, I’m sharing essential insights into creating a watchlist and finding good opportunities in the stock market based on fundamental and technical analysis in very simple words. No high-fi techniques, no jargon, just a beginner-friendly guide.
Create a Stock Watchlist - First Step to Organized Investing
Creating a stock watchlist is the first step towards organized investing. It is like creating a shopping wishlist. And, this is important because impulse buying is not a good thing; in fact, it is a dangerous thing in the stock market.
If you don’t have even a basic stock watchlist, you may want to learn to build your stock watchlist from scratch. Once you have created your watchlist, we can move further to the next steps.
Do a Little Fundamental Analysis - Sort What to Buy
Start picking the names of stocks from your watchlist one by one and get a little deeper in fundamental analysis to understand which stock to buy.
Fundamental analysis is like a health check-up for a company. It helps recognize how strong and trustworthy a business is.
I don’t want to complicate this for you. So, here are the 5 core metrics of fundamentals against which you should asses all the stocks in your watchlist.
- P/E (Price to Earnings) Ratio – This ratio compares stock prices to earnings per share.
– Lower P/E may mean the share is undervalued. This may be a good buy.
– A higher P/E may mean that the share is possibly overpriced or fast-growing. - ROE (Return on Equity) – This metric tells how well the company turns investors’ money into profit. A higher return on equity signifies strong management and business efficiency.
- Debt-to-Equity Ratio – It shows how much debt a company has as compared to its equity. A lower debt-to-equity ratio indicates that the company is safer and less risky when investing in the stock.
- Quality of Management – It is important to research the leadership of the company whose stock you want to invest in. The past records, communication, and decision style are predictors of a company’s future.
- Industry and Sector Analysis – In the market, there are always a few sectors that boom while others slow down. So, it is important to follow the sector rotation trends. The stock you added to your watchlist might be a good one, but the timing can be wrong due to its industry slowdown.
#Tip: You can use Screener to do fundamental analysis of stocks in your watchlist.
Learn a Little Technical Analysis - Know When to Buy
Fundamental analysis will help you sort out ‘what’ shares to buy, and technical analysis will help you find ‘when’ to buy the chosen shares.
While technical analysis is a vast ocean, you need not be a ‘chart guru’ to understand market movements and begin your investment journey. To begin with, you can focus on learning just the following –
- Price Action – The movement of stock prices.
- Support – The price level at which a stock tends to stop falling.
- Resistance – The price level at which a stock tends to stop rising.
Having a basic understanding of a stock’s price action, support, and resistance helps you enter the market at the right time and avoid emotional buys.
#Tip: You can use TradingView to dig into technical analysis.
Be a Risk Manager - Protect Your Capital
Any investment requires proper risk management. Most people enter the stock market with the aim of making big profits. But, smart investors know that, more than making profits, it is important to protect your capital.
- After all fundamental and technical analysis, one can go wrong in their stock selection. Therefore, as an insider joke, we say that one should never marry a stock. If your stock is going down to a certain price level, make a smart exit rather than staying invested just because you like that stock. Avoid emotional investment.
- Diversification is the mantra to keep your capital protected plus growing. Never put more than 10% of your capital in one stock. Divide your capital among stocks of different companies and sectors. The more diversified your portfolio is, the better the chance for your money to grow.
- Keep a journal of your entries, exits, and learnings from the market. Every entry and exit in the market should be based on a strategy rather than a random emotional decision. Profits and losses are okay, but you should see all the trades from a learning point of view. Every trade will teach you a lesson. Note it, learn it, and use it in the future investment journey.
My Take
When I started investing, I made the mistake of jumping into trending stocks without studying the basics. I quickly learned that FOMO isn’t a strategy. And what matters in the stock market is strategy. From stock picking to making entry, booking profit or loss, everything needs to be guided by strategy, not emotions or free will.
Market demands patience and consistency. If you ever feel you can do better with a helping hand guiding your investment journey, feel free to reach out to the team at MoneyAnna. We are always here to help you grow and achieve your financial goals.
Frequently asked questions (FAQ)
You can start with as low as 5k -10k. When starting, you should focus on learning strategies and understanding the market rather than making big profits.
Yes, you can invest in fundamentally good companies without technical analysis, but basics like support and resistance will help you find good entry points.
The answer depends on various factors, including the quality of your stock and your risk appetite. Stop loss and diversification are helpful in these conditions.
A common rule is 2–3% below your buying price or based on a support level. Your total risk on a single trade should not exceed your predefined capital risk—say, 10% of your total investment.
Spread your money across different stocks in different sectors like banking, IT, FMCG, pharma, etc. This protects you if one sector underperforms.
