What is fundamental analysis and how could affect your portfolio and your life?

Different investments act, well, differently!

Everyone knows that diversification is important but how much is too much? How much is too little? What is the right implementation of stocks, bonds, real estate and other investment variations that can make a profound affect on your investment return and stability.

Add to this Momentum, vs. Dividend, vs. Blue Chip and also interest rates, capital gains, growth rates, sales rates, PE ratios, etc. and the ensing performance and tax aspects - it's a lot to consider when designing and implementing the portfolios that's most accurate to the potential outcome you desire. It's what we do every day!

Understanding How Investments Work and Why, Is Truly Important. Here's Why:

Take for instance that many people thought bonds are generally a safe investment. However if you had invested your portfolio entirely in bonds at the beginning of 2008 or at the beginning of 2022, based upon the type of bonds that you might have owned, you could have owned a decline in value of anywhere from 15% to 100% of the value of your portfolio. This makes it pretty important to know exactly how your investments work and why.

Everyone wants to get a good return on their investment, they want to see their portfolio proliferate on an ongoing basis.

Stocks may be large cap, midcap, or small cap. They may be value or growth oriented.A portfolio of stocks may be designed for momentum or relative stability.


In momentum, high growth rates, high sales rates and high PE ratios may drive the portfolio to stellar returns, but based on the changing circumstances may also create extra volatility and fast decline. In a portfolio that is value based, growth and sales rates, which are still important, may not have as much meaning, however a low PE ratio may be part of the key, as an undervalued security which has the potential to appreciate is what's being looked for.

When adding bonds to the portfolio, one must consider the strength of the underlying issuer. The United States is still the strongest issuer in the world for many reasons, one of which is it's standing as the primary reserve currency. Still, when inflation rages one of the key drivers to bring down inflation is increasing interest rates. Anyone with the slightest understanding of economics knows that when interest rates go up, bond values go down. That is why when interest rates are likely to rise it is important to have a very short maturity or duration in a bond portfolio. Cash is even better for that portion of the portfolio. That is why it is so interesting and perhaps concerning that the people that ran Silicon Valley Bank and a few other banks were underwater when it was totally obvious that the Federal Reserve was going to raise interest rates in a fight to reduce inflation. bonds are great for income but are horribe whn interest rates are rising.

Another great area for income in Dividend Stocks. Dividend oriented stock pays regular dividends to the holder. That's probably why John D Rockefeller said, "Nothing makes me happier than receiving my dividends". However, dividend stock is not generally a fast grower. For faster growth you need momentum, as stated above.

Another area of fundamental analysis includes looking at the big picture in regard to what investors want. From 2020 until about the middle of 2022 investors really liked energy. About the middle of 2022 energy slowed down and began to descend as investors desire waned. Investors moved towards A.I. or artificial intelligence investing and from the beginning of 2023, A.I. became the darling, driving companies like Nvidia and the big players such as Google, Meta, Microsoft and others back up even though interest rates were still being increased.

Understanding growth rates, sales rates, the difference between growth and value (stocks), the difference between capitalization rates as well as what's in play and diversifying that with the correct bond structure, real estate, how dirivatives work and cash and so much more is all a part of what must be considered in regards to the fundamental analysis and implementation of a portfolio. Also, being able to know to a large degree what is more likley to out-produce the other - value, growth, large caps, small caps, etc. takes real time knowledge, knowledge you just can't get from a book.

Putting it all together in order to reach the outcome you desire takes, in the trenches experience, skill and knowledge.

For more than 25 years, we've been in the trenches fighting the investment battle for our clients. It's what we know! It's why you can sleep easier at night knowing that you're retirement is being well taken care of.