A recurrent behavior exhibited by several investors, whether seasoned veterans or eager rookies, is an over-reliance on fundamental analysis. At its core, fundamental analysis is merely another term for accounting. Normally a refined and reputable industry, accounting is a legacy tool : its validity is only based on a historical time frame. Any attempt to forecast future financial performance based on accounting standards is a contradiction in terms. The discipline's inherent validity can only be exercised in a narrow framework, thus immediately negating prediction as mere conjecture.
Wall Street conglomerates will of course parry what is manifestly irrefutable. They will rename efforts that stemmed from guess-work as "forward basis analysis." Earnings performance that were based upon past competitive paradigms are now "trailing earnings," a connotation of movement towards ever higher thresholds. The problem is that no matter how something is defined or contextualized, the essence of the matter remains the same. As such, investors should read up on Albert Einstein as much as they do on Jim Cramer or any number of bull market heroes and leading ladies.
Undoubtedly, the biggest impact in the modern financial markets is the advent of the internet and the speed by which information is circulated. Fundamental analysis, though it has significant merits when applied appropriately (and responsibly), is unfit as a singular device to hedge our personal portfolio performance. Data science and the ability to extract meaningful, actionable analysis from an enormous pool of facts, figures and even rumors, is the key to sustained success. Applying these right choices now or employing the abilities of specialists can positively impact your family's future!