Investing your money into the stock of the company that you know about only through the word of mouth is an ill-informed investing strategy. Maybe you've read about a company stock that interests you, or one of your friends is excited about a particular stock. Perhaps you keep seeing a stock on various "buy" lists and wonder what makes it so appealing. To make a well-informed, rational decision about your potential investment it would be beneficial to be able to judge whether circumstances, not just psychology, have changed. A strong fundamental analysis can become the most important key to making a good decision.

Fundamental analysis means conducting basic research on a company. Fundamental market analysis examines of the underlying forces that affect the interests of the economy, industrial sectors and companies. As with most analysis, the goal is to derive a forecast for the future. A well conducted fundamental analysis focuses on creating a clear picture of a company, identifying the intrinsic or “fundamental” value of its stock shares, and assists in making wise investing decisions based on that information.

When analyzing a company, there are several key features that one might want to consider. A competitive advantage of the company, such as patents, rate of growth of customer base and other relevant factors might need to be looked at. A record of consistently growing revenues could be a strong indicator of future growth. Examining the balance sheet, could reveal a great deal of information about the company such as debt standing and cash flow.

Fundamental analysis is good as a long-term investing strategy. It will help identify companies that represent good value. Performing fundamental analysis can be a lot of hard work. But that is, arguably, the source of its appeal. By taking the time and making an effort to dig into a company's financial statements and assess its future prospects, investors can learn enough to know when the stock price is wrong.