Remember, while markets are variable, these fundamental rules of investing are constant:

• Diversification : Spread your money among a number of different types of investments - lessens your risk because even if some of your holdings go down, others may go up (or at least not go down as much). On the flip side, a diversified portfolio is unlikely to outperform the market by a big margin for exactly the same reason.

• Liquidity: Maintain enough cash reserve so that you do not have to withdraw from your stock portfolio during extreme market lows. In other words, don’t put your money into stocks that you will need in less than five years.

• Market Timing:Keep your long-term goals in sharp focus, and stick to your long-term asset allocation plan. Change your asset allocation only when your goals or circumstances change, not when markets gyrate.

• Planning: Keep your long-term goals in sharp focus, and stick to your long-term asset allocation plan. Change your asset allocation only when your goals or circumstances change, not when markets gyrate.

• Knowledge: A portfolio composed solely of short-term assets, while safe from short-term market fluctuations, increases the risk that you will not achieve your long-term investment goals after inflation.

• Risk: A portfolio composed solely of short-term assets, while safe from short-term market fluctuations, increases the risk that you will not achieve your long-term investment goals after inflation.

Analyze the markets with Fundamental Analysis?
Fundamental analysis is a stock valuation method that uses financial and economic analysis to predict the movement of stock prices. The fundamental information that is analyzed can include a company's financial reports, and non-financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, economy-wide changes, changes in government policies etc.

Profitability ratios are used to decide whether a company is earning acceptable profits and to determine whether the profits trend is rising or falling. They are also used to compare the relative performance of companies in a given sector.

Financial Ratios:
A company's share price is ultimately driven by its profitability. Your task as an investor is to identify those companies with strong prospects at the earliest possible stage.

The following tools of Fundamental Analysis will equip you to analyze the markets/sectors/stocks better thus helping you make informed decisions without getting influenced by the rumors in the market.

There are a number of ways to assess the value of a company, including

• Gross profit margin The gross profit margin is usually fairly stable for each company. A decline in the margin may be caused by several factors, including a rise in the cost of goods purchased from suppliers, a fall in the selling price due to competition or lower customer demand.

• Net profit margin A healthy net profit margin is a sign of corporate profitability, although, as with the gross profit margin, you should compare this figure with the profit margins of other companies in the same industry sector.

• Market Timing:Keep your long-term goals in sharp focus, and stick to your long-term asset allocation plan. Change your asset allocation only when your goals or circumstances change, not when markets gyrate.

• Return on Equity (ROE) This shows the performance of the company in relation to the capital invested in that company. ROE is the amount, expressed as a percentage, earned on a company's common stock for a given accounting period. It is calculated by dividing a company's earnings by the average stockholders' equity throughout the accounting period

• Knowledge: A portfolio composed solely of short-term assets, while safe from short-term market fluctuations, increases the risk that you will not achieve your long-term investment goals after inflation.
  
  Return on capital employed indicates how well a company can generate cash from its total capital base (stockholder's equity plus long-term debt).

• Return on Capital Employed (ROCE) Return on Capital Employed is a ratio that indicates the efficiency and profitability of a company's capital investments. It is calculated as the Earnings before Interest and Tax divided by the difference between Total Assets and Current Liabilities.
  
  ROCE should always be higher than the rate at which the company borrows, otherwise any increase in borrowing will reduce shareholders' earnings. A variation of this ratio is return on average capital employed (ROACE), which takes the average of opening and closing capital employed for the time period.

• Current Ratio A current ratio tells about the company's ability to meet the commitments well in time.A decreasing current ratio can be taken as a sign of caution while also looking into the Working Capital Management of the company.

• Net –Worth The total net worth and a Total Outstanding Liabilities/Total Net Worth ratio tell the firms ability to raise finance in the market and through Banks and financial institutions. This too needs to be seen before investing.

The financial ratios mentioned above are a very small part of Fundamental Analysis. Fundamental Analysis is a very vast subject. And, an in-depth understanding of the same can go a very long way in benefitting you with the research on your investments and the markets. We ecommend thorough reading of books dedicated to Fundamental Analysis to get a proper understanding on the subject.

Always remember, that careful research is vital to successful investing. And, at IDBIPaisabuider you have access to a host of rnews and information from a wide variety of sources, enabling you to make smarter and more informed investment decisions. You can visit the following links to get all the relevant data required for your fundamental research:

For information on companies - http://www.idbipaisabuilder.in/Market_Content/CMmktOverview.aspx

For latest news and happenings - http://www.idbipaisabuilder.in/Market_Content/CMDataNews.aspx

For various Research tools - http://www.idbipaisabuilder.in/Market_Content/Secure_Reports.aspx

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