Investment is something that is not easy and you need to learn a lot of terminologies and concepts when you invest your money. We are talking about your hard earned money and we are not going to lose it in an investment. Smart investors minimize risk and get big returns in their investment. The 2nd worlds richest man, the investment guru, Mr. Warren Buffet made his billions from investment.

As we know, returns and risk are 2 variables in investments. Sometimes, people are just too concern about risk that they forget other important things. Investment is not just about risk, it is also about your style of investing, techniques, market psychology and many other factors.

For a beginner, you will be overloaded with a lot of information. some of which are very important and some are just not important at all. Things can get worst if your knowledge on the market is very limited and you always follow hot tips. These tips can be hot to your returns and can also be hot on your losses.

Smart investors typically use technical and fundamental analysis in evaluating equities. Fundamental analysis is an investment approach that focuses on the fundamentals of the company. The underlying approach is to establish what the company is worth, sometimes referred as the intrinsic value of a company. The intrinsic value of a company is determined by sales, profitability, operating margins, cash flows, financial gearing, balance sheet and growth potential.

On the other hand, technical analysis focuses on price and market action. The underlying rationale in this approach is that all information is already reflected in the stock price. For this reason, technical analysis is also known as chartists. Technical analysis studies trends, moving averages, Dow Theory and market indices.

Investors also seek for growth or value. Value investors will invest on stocks that have a low price- to- book ratio or low price- to- earnings ratio compared with the market and to similar stocks in the same industry. Growth investors on the other hand seek to invest in companies that can achieve a higher than average earnings growth.

Investing is rooted in psychology. It involves risks and profit opportunities, which in turn involve human emotion and judgments. Emotions such as fear, greed and herd instinct rule the market at times. Hence, market overreacts at times.

There is nothing that is easy in this world. If you want to make big money in your investment, you must do your research thoroughly and you must not have the ‘park and pray’ attitude when investing your money.