My Interest In Learning Financial Analysis

With the rise of giants like Facebook and Uber comes this question: why these companies managed to succeed while so many others failed? On paper, Facebook's adaptability in allowing third-parties to create apps on their site was prudent whereas Myspace's inflexibility to do so contributed to their fall into obscurity. Uber's aggressively rapid global expansion gave them an edge in accessibility in comparison to their competitor Lyft. But I wonder if we could find data that could be used to foresee their growth into leaders of their respective sectors.

This interest in finance inspired me to experiment in investing: using $100,000 in virtual money on Investopedia's stock market simulator. I have also analysed why I have chosen the companies on my portfolio. I found this process of analysis from reading financial statements to balance sheets to be quite satisfying. Since I genuinely enjoyed the process of delving deeper into the world of finance, this experience has definitively cemented my desire to study finance.

In order to gain a broader picture of the profession, I read 'Economics: The User's Guide'. I learned how the Keynesian's theory that speculation on the average opinion about the average opinion is what determines the price of financial securities, in stark contrast to the Neoclassical view that the prices of shares reflect all information available. I would love to learn how to interpret financial data through analysis and thus price financial securities.

Due to the catastrophic effects of the 2008 financial crisis, I picked up 'The Big Short' to learn what caused it to take place. This introduced me to complex financial products such as the 'Collateralised Debt Obligation (CDO)',falsely marketed as triple A rated bonds despite being based on subprime mortgages, in which thousands of home loans were carved up into tranches and sold to investors . This introduction into derivatives eventually led me to come across 'Long-term Equity Anticipation' which I found enables one to buy a stock at a fixed price for a certain amount of time, a useful speculative tool I look forward to using.

Building upon this, my introduction to technical analysis arrived in the form of the 'Black-Scholes'. I found this bell-curve model especially interesting because I found that one of its weaknesses (that it fails to apply to companies whose share price could change rapidly) is directly relevant to one of the companies in my portfolio, namely Tesla, due to them being under investigation and scrutiny for fraud and Musk's controversial behaviour. Tesla's oscillating share prices have led me to believe that tendencies in human behaviour have a major effect on the price of shares.

In addition to the rising prevalence of behavioural economists, this inspired me to read 'Thinking Fast and Slow' to gain insight into the logical shortcuts that tend to cause irrational actions. On the flip side to technical analysis, I came across fundamental analysis through reading 'One Up On Wall Street'. I learned of the different categories of companies from Stalwarts to Cyclicals and how the p/e ratio varies depending on how optimistic investors are about a business. Researching the different methods with which companies could be valued was an activity I greatly enjoyed doing.

In my spare time I enjoy pushing myself by playing badminton competitively while to relax I like to play my guitar and cook halfway decent food. I am determined to learn more about financial products and I have enjoyed learning about various methods of analysis. I believe that a financial analyst is the perfect career for me and therefore I would love to study finance in order to make my dream come true.

18 March 2020
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