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Module 0 of 6
← Levels ← nexmind
Intermediate Level
✅ Prerequisites: Stock Market 101 completed

Going Deeper 📊

You know what a stock is and how markets work. Now let's learn how to actually evaluate companies, read charts, and build a real portfolio.

📋 Reading Numbers
📈 Technical Analysis
🏗️ Portfolio Building
📦 ETFs Deep Dive
💸 Tax & Costs
🗺️ Your Plan
What's different at this level? Beginner taught you the vocabulary. Intermediate teaches you how to think. You'll learn to look at a company and decide for yourself if it's worth buying — not just follow someone else's tip.
📋

Fundamental Analysis

Read the actual numbers a company publishes — profit, debt, cash flow — and judge if it's healthy.

📈

Technical Analysis

Use price charts and patterns to spot trends and find better moments to buy or sell.

🏗️

Portfolio Thinking

Stop thinking about individual stocks and start thinking about your whole portfolio as a system.

⚠️ Same disclaimer applies: This is education, not advice. Always do your own research and speak with a qualified adviser before making any real investment decisions.
Module 1

Reading the Numbers

Before buying any stock, you should be able to answer: is this company actually healthy?

Fundamental Analysis is the process of reading a company's financial data to decide if its stock is worth buying. Think of it like reading a report card before deciding to invest in someone.

The 5 Numbers That Matter Most

P/E Ratio
Price ÷ Earnings Per Share
Tells you how much you're paying for each £1 of profit. A P/E of 20 means you're paying £20 for every £1 the company earns per year.
Lower = cheaper relative to earnings. Compare within same industry.
EPS — Earnings Per Share
Net Profit ÷ Total Shares
How much profit the company made per share. Growing EPS over time = the business is expanding its profits. Shrinking EPS = trouble.
Look for consistent growth over 3–5 years.
Profit Margin
Net Profit ÷ Revenue × 100
What % of sales becomes actual profit. A margin of 20% means for every £100 of sales, £20 is kept as profit. Higher is better.
Software companies: 20–40%+. Supermarkets: 1–3%. Context matters.
Debt-to-Equity (D/E)
Total Debt ÷ Shareholders' Equity
How much the company borrows versus what it actually owns. High D/E means heavy debt — fine for banks, risky for small companies.
Under 1.0 is generally safe. Over 2.0 needs scrutiny.
Free Cash Flow (FCF)
Operating Cash Flow − Capital Expenditure
Real cash the company generates after paying its bills and investments. A profitable company can still run out of cash. FCF shows the truth.
Positive and growing FCF = strong, self-sustaining business.
Return on Equity (ROE)
Net Income ÷ Shareholders' Equity × 100
How efficiently the company uses investor money to generate profit. Warren Buffett looks for ROE consistently above 15%.
Above 15% is strong. Above 20% is excellent.
💡 Where to find these numbers: Go to any stock on Yahoo Finance, Google Finance, or your broker's app. Look for "Financials" or "Key Statistics." Everything is there for free.

Putting It Together: A Simple Checklist

  • 1

    Is revenue growing year-on-year?

    Check the last 3–5 years. Consistent growth = healthy. Flat or falling = warning sign.

  • 2

    Is the P/E reasonable for this industry?

    Compare it to 2–3 similar companies. Don't compare a tech stock's P/E to a bank's — they're different worlds.

  • 3

    Is debt under control?

    Check the D/E ratio. Also check if they can comfortably pay interest from their profits (interest coverage ratio > 3x).

  • 4

    Is free cash flow positive?

    This is the real acid test. Profit can be manipulated by accounting. Cash flow is much harder to fake.

  • 5

    Does the company have a competitive advantage?

    Buffett calls this a "moat." What stops competitors from just copying them? Brand, patents, network effects, switching costs?

🧩 A company has revenue of £1 billion but Free Cash Flow of −£200 million. What does this mean?
  • The company is doing well — revenue is high
  • The company is spending more cash than it generates — a potential red flag
  • Negative FCF always means the company is going bankrupt
  • FCF doesn't matter as long as profits are reported
Module 2

Technical Analysis

Fundamental analysis tells you what to buy. Technical analysis helps you decide when to buy it.

Technical Analysis studies price charts and trading patterns to predict future price movements. It doesn't care about the company's profits — it cares about what the crowd is doing with the price.

Moving Averages 📉📈

Stock price
50-day MA (short-term trend)
200-day MA (long-term trend)
Golden Cross ↑
When the 50-day MA crosses above the 200-day MA → "Golden Cross" — a bullish signal
✨

Golden Cross

50-day MA crosses above the 200-day MA. Signals potential uptrend ahead. Many investors see this as a buy signal.

💀

Death Cross

50-day MA crosses below the 200-day MA. Signals potential downtrend. Often a warning to be cautious.

Support & Resistance 🏗️

🛏️

Support Level

A price floor where the stock tends to stop falling and bounce back up. Buyers consistently step in at this level. A good potential entry point.

🪨

Resistance Level

A price ceiling where the stock tends to stop rising and fall back. Sellers consistently step in. If price breaks through resistance, it often surges.

RSI — Relative Strength Index 🌡️

RSI Scale (0–100)
0305070100
Oversold Neutral Overbought

The marker above shows RSI at ~72 — the stock is in overbought territory, meaning it may have risen too fast and a pullback is possible.

RSI below 30

Oversold. The stock may have fallen too fast. Could be a buying opportunity — or a sign of serious problems. Investigate why.

RSI 30–70

Neutral zone. Normal trading range. No extreme signal either way.

RSI above 70

Overbought. The stock may have risen too fast. Could signal a pullback coming. Be cautious about buying at these levels.

⚠️ Technical analysis is a tool, not a crystal ball. No indicator predicts the future perfectly. Use technical signals alongside fundamental analysis — never rely on charts alone.
🧩 A stock's 50-day moving average just crossed below its 200-day moving average. What is this called and what might it suggest?
  • Golden Cross — a bullish signal to buy
  • Death Cross — a warning that a downtrend may be forming
  • Support level — price is finding a floor
  • RSI reversal — the stock is overbought
Module 3

Building a Real Portfolio

Stop thinking about individual stocks. Start thinking about your portfolio as a whole system.

The goal: Build a collection of investments that, together, give you strong returns without catastrophic risk. No single stock should be able to wipe you out.

Asset Allocation — The Big Decision

Example: A moderate-growth portfolio for a young investor

Stocks
70%
Bonds
20%
Cash
10%
Rule of thumb: The younger you are, the more stocks you can hold (higher risk, higher reward over time). As you get older, shift gradually toward bonds (more stable, lower return).

Diversification — Don't Put Eggs in One Basket

🌍

Across Geographies

Own stocks from different countries. If the US market dips, your European or Asian holdings might hold steady.

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Across Sectors

Own tech, healthcare, consumer goods, finance, energy. If one sector crashes, others may survive or even rise.

📅

Across Time

Don't invest everything at once. Use dollar-cost averaging to spread your entry points over months.

Position Sizing — How Much Per Stock?

The 5% Rule: Never put more than 5% of your total portfolio in a single stock. If that stock goes to zero (it happens), you lose 5% — uncomfortable but survivable. If you had 50% in it, you're in serious trouble.

Rebalancing — Keeping Your Ratios in Check

  • 1

    Set your target allocation

    e.g. 70% stocks, 20% bonds, 10% cash.

  • 2

    Check it every 3–6 months

    If stocks have done very well, they might now be 85% of your portfolio — more risk than you intended.

  • 3

    Rebalance by selling what grew too much, buying what shrank

    This enforces "sell high, buy low" automatically — one of the smartest habits in investing.

🧩 You have £10,000 to invest. How much should you put in a single stock at most, according to the 5% rule?
  • £2,000 — 20% is fine for a stock you believe in
  • £1,000 — 10% is a safe maximum
  • £500 — no more than 5% in any single stock
  • £10,000 — go all in if you've done your research
Module 4

ETFs — Deep Dive

You know what an ETF is. Now let's understand the different types and how to choose between them.

An ETF (Exchange-Traded Fund) is a basket of investments packaged into one product you can buy like a stock. One purchase = instant diversification.

Types of ETFs

🌐

Broad Market ETFs

Track a wide index like the S&P 500 (VOO, SPY) or the entire world market (VT). Best for passive, long-term investing. Very low fees.

🏭

Sector ETFs

Focus on one industry — tech (QQQ), healthcare (XLV), energy (XLE). Higher potential reward but less diversified than broad ETFs.

💰

Dividend ETFs

Holds stocks that pay regular dividends. Good for generating income while holding. Examples: VYM, SCHD.

🏦

Bond ETFs

Hold government or corporate bonds. More stable than stocks but lower returns. Good for balancing a portfolio (e.g. BND, AGG).

ETF vs Individual Stocks — When to Use Which

ETFIndividual Stock
DiversificationBuilt-in — hundreds of companiesNone — single company risk
Research neededMinimal — just understand the indexDeep — financials, news, sector
Upside potentialMarket average (~10%/yr)Can massively outperform
Downside riskCushioned by diversificationCan lose 50–100% of value
Fees (expense ratio)Very low (0.03–0.2%)Zero (just trading fees)
Best forMost people, most of the timeExperienced investors with edge

The Expense Ratio — What It Actually Costs You

Expense ratio is the annual fee an ETF charges, expressed as a percentage. Sounds tiny — but it compounds over decades.

Example: £10,000 invested for 30 years at 10% return:
— With 0.03% fee (VOO): £171,800
— With 1.00% fee (active fund): £132,700

That 1% difference costs you £39,000 over 30 years. Always check the expense ratio before buying.
🧩 You want low-effort, diversified long-term growth with minimal fees. What's the best fit?
  • A sector ETF focused on one industry
  • 10 individual stocks you've researched carefully
  • A broad market ETF like VOO or VT with a low expense ratio
  • A bond ETF for maximum stability
Module 5

Tax & The Real Cost of Trading

Every return you see quoted is before tax. Understanding this protects your actual profits.

Capital Gains Tax — What You Owe When You Sell

Short-Term Gains
Higher %
Selling a stock you've held for less than 1 year. Taxed as ordinary income — the same rate as your salary. Can be 20–40%+ depending on your bracket.
Long-Term Gains
Lower %
Selling a stock held for more than 1 year. Taxed at a lower preferential rate. This is a huge incentive to hold investments long-term.
💡 The single best tax move for most young investors: Use a tax-advantaged account. In the UK, an ISA (Individual Savings Account) lets you invest up to £20,000/year completely tax-free — no capital gains tax, no dividend tax. In the US, a Roth IRA does something similar. Always fill these before a regular account.

Tax-Loss Harvesting

Tax-loss harvesting means deliberately selling a losing investment to offset gains elsewhere — reducing your tax bill.

Example: You made £2,000 profit on Apple. You're also sitting on a £500 loss on another stock. Sell the loser → your taxable gain drops to £1,500. You've effectively saved money by locking in a loss strategically.

Hidden Costs That Eat Your Returns

💸

Trading Fees

Some brokers charge per trade. £5 to buy + £5 to sell on a £200 position = 5% gone before the market even moves.

📊

Bid-Ask Spread

The gap between buy and sell price. On liquid stocks it's tiny. On illiquid stocks you can lose 1–2% just by trading.

🔄

Over-Trading

Every time you trade, friction accumulates. Studies show that most active traders underperform buy-and-hold over 10+ years.

🧩 You sell a stock after 8 months for a £500 profit. You also have a stock showing a £200 loss. What's the smartest move before year-end?
  • Hold both positions and pay tax on the full £500 gain
  • Sell the losing stock to offset some gains — pay tax on only £300
  • Wait a year before selling anything so you get long-term tax rates
  • Put the profits in a savings account to avoid tax
Module 6

Your Investment Plan

Tactics without a strategy is just noise. Build a plan and stick to it.

Most investors fail not because they lack knowledge — but because they lack a plan. When markets crash, people with a plan stay calm. People without one panic-sell.

Build Your Investment Policy Statement (IPS)

Professional fund managers use an IPS to guide every decision. You can have a simple personal version.

  • 1

    Define your goal

    What is this money for? University fund, first house deposit, retirement? Your goal determines your time horizon and risk tolerance.

  • 2

    Set your time horizon

    Money you need in 1–2 years → keep it safe (cash, bonds). Money you won't touch for 10+ years → can take more risk (stocks, ETFs).

  • 3

    Define your risk tolerance

    Ask yourself: if my portfolio dropped 30% tomorrow, what would I do? If the answer is "panic-sell," you're taking too much risk.

  • 4

    Set your target allocation

    Write it down. Example: 70% global ETF, 20% bond ETF, 10% individual stocks I've researched. Stick to it.

  • 5

    Decide your review cadence

    Check your portfolio quarterly — not daily. Rebalance if any allocation drifts more than 5–10% from your target.

  • 6

    Write the rules you'll follow in a crash

    e.g. "If my portfolio drops 20%, I will not sell. I will continue my monthly contributions." Writing this in advance removes emotion from the decision.

What You've Learned at This Level 🎓

📋 How to read financial statements (P/E, FCF, margins)
📈 Technical signals: MAs, RSI, support & resistance
🏗️ How to build and rebalance a diversified portfolio
📦 The real difference between ETF types
💸 How tax and hidden costs affect your real returns
🗺️ How to write your own investment plan
📚 What to read next: The Little Book of Common Sense Investing by John Bogle (ETF founder), One Up on Wall Street by Peter Lynch (finding great stocks), and The Psychology of Money by Morgan Housel (the most important one of all).
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