Investment Analysis | Best Financial Plan

Investment Analysis | Best Financial Plan

Investment Analysis for Your Financial Plan

A core piece of your financial plan likely includes your investment portfolio. At Finley Davis, we always ask our clients to consider how their investments fit into their overall goals. We also understand that the key to a successful portfolio lies in thorough investment analysis. 

What is Investment Analysis?

Investment analysis is all about determining how an investment is likely to perform and how well it suits an investor. This encompasses how long an investor plans to hold on to an investment and their long-term financial goals. It also considers how the investment will contribute to their overall portfolio.

A Key to Financial Planning

Investment analysis shares many similarities to financial planning. One of which is considering the investor's overall financial goals and current financial situation. There are several techniques we can employ to determine what securities will best suit the needs of our clients.

Bottom-Up Analysis

Bottom-up analysis involves analyzing and evaluating individual stocks for their merits. It hinges on finding the best stocks and companies regardless of the larger economic and market cycles. This is much more in line with a microeconomic approach to investing as opposed to a global approach. Of course, at some point, the larger economic trends of the market are taken into consideration, but this analysis begins by evaluating a particular company or stock and scaling up. 

This type of analysis typically lends itself well to longer-term buy-and-hold investment strategies. Since it involves gaining a deep understanding of a single company or stock, it can provide insights into long-term growth potential.

Top-Down Approach

The top-down approach for investment analysis lies in direct contrast to the bottom-up approach. The top-down approach involves analyzing the macroeconomic trends at large. This includes analyzing the market and industry trends from a global perspective. This approach lends itself to more opportunistic investing as it focuses on making a profit based on short-term movements of the market.

Fundamental Analysis

The goal of fundamental analysis is to determine the intrinsic value of a particular stock and compare that to the current market value. There are a few methods for determining the intrinsic value of a stock. Quantitative methods are related to analyzing characteristics that can easily be represented in numbers such as revenue, assets, and profit. Qualitative methods study less tangible aspects such as the quality of company executives, brand-name recognition, business model, and a company's history.

Technical Analysis

Technical analysis relies heavily on statistical measurements and evaluates changes in stock prices. This technique often uses precisely calculated charts and graphics based on market movements. It focuses on trading signals and uses charting tools to evaluate a security's weakness or strength. This technique is frequently used by day traders to devise strategies for buying and selling stocks.

Is Your Portfolio Working for You?

This is the question that much of our financial planning with clients boils down to. We help clients identify whether their investments serve their long-term financial goals through expert financial analysis and strategic planning. To schedule a consultation with one of our financial advisors, contact us today.

*Disclosure* Investing involves risk and possible loss. Active portfolio management, including market timing, can subject longer term investors to potentially higher fees and can have a negative effect on the long-term performance due to the transaction costs of the short-term trading. In addition, there may be potential tax consequences from these strategies.  Active portfolio management and market timing may be unsuitable for some investors depending on their specific investment objectives and financial position. Active portfolio management does not guarantee a profit or protect against a loss in a declining market.