How do I analyse and pick stocks for long-term investment? Is technical analysis better than fundamental analysis?

Ans: Analysing and selecting stocks for long-term investment involves a mic of technical and fundamental analysis, though the weight you assign to each may vary based on your investment strategy and preferences.

Fundamental analysis involves evaluating a company's financial health, its management, competitive advantages, industry trends, and growth potential. This includes studying metrics like revenue, earnings, debt levels, cash flow, market share, and analysing qualitative aspects like management quality, competitive advantages (like patents or unique products), and growth prospects.

It's valuable for long-term investors interested in the company's underlying health and potential for future growth.

Technical analysis, on the other hand, focuses on studying price charts (candlesticks, Point & Figure, Renko, Heikin Ashi, Kagi, line charts, etc.) volume patterns, and market trends to predict future price movements.

Technical analysis involves more about analysing historical price data, identifying patterns, and finding out probabilities that a price chart would behave just as analysed based on market psychology and price momentum. This approach is often used by traders aiming for shorter-term gains.

For long-term investors, fundamental analysis tends to carry more weight because it assesses the intrinsic value of a company. However, some investors use technical analysis to time their entry into a stock or to identify potential entry or exit points.

Here are six steps for a long-term investment approach:

1. Understand the business: Research and understand the company's products/services, business model, competitive landscape, and industry trends. Look for a sustainable competitive advantage and growth potential.

2. Financial health: Evaluate the company's financial statements, looking at revenue, earnings, cash flow, debt levels, and profitability ratios. Compare these metrics with competitors and industry benchmarks.

3. Management quality: Assess the management team's track record, their vision for the company, and their execution capabilities. Strong leadership can significantly impact a company's long-term success.

4. Valuation: Determine if the stock is undervalued, fairly valued, or overvalued. Compare key financial ratios (like P/E ratio, P/B ratio, and others) to historical averages, industry peers, and the overall market.

5. Future prospects: Consider the company's growth prospects, potential risks, and any upcoming catalysts or challenges that might affect its performance in the long run.

6. Diversification: Spread your investments across different sectors and industries to reduce risk. This helps protect your portfolio from adverse events affecting a particular sector.

Ultimately, the "better" approach between technical and fundamental analysis depends on your investment goals, risk tolerance, and time horizon.

Many successful long-term investors use a combination of both to make informed decisions.