On Becoming a Successful Investor, Learning Accounting and How to Write
This is something new that I’m trying out. Providing responses to emails on the blog or highlighting some helpful forum posts as I’m sure there are people with similar questions.
Journey to Becoming a Successful Value Investor
A question came up in the forum that resonated with me.
In my journey to become a successful value investor I am having trouble retaining knowledge, whether it be from reading, watching lectures, or researching companies. What are some methods that have proven effective to retain knowledge? Do you have any suggestions on how expertise can be developed in the most efficient manner?
To view the answer, follow this link.
How to Learn Accounting if You have No Finance Background
I was wondering if you had any insight, or could speak from your experience on how you learned about accounting and how to interpret financial statement. You mentioned the book, The Basics of Understanding Financial Statements, which is a very good recommendation.
Just wondering if you could recommend any other books or have any suggestions. I know you come from an engineering background, and I’m assuming you never took courses on finance and accounting, so I thought you would be a good person to ask being that I lack the experience in these subjects as well.
Keep up the good work with the blog, and thanks for all the free content.
Spot on. I’ve never take a course in finance. If you are asking questions, you are eager to learn and that’s all you need. If I can do it, so can you.
But here’s some practical advice.
Start with the list of best investment books on value investing. It has been arranged from easiest to hardest and six out of the ten books focus on accounting and interpreting financial statements.
Don’t bother reading The Intelligent Investor or Security Analysis yet. I don’t recommend it. You won’t make it through. I literally fell asleep every time I picked it up. Took me two months to skim through the Intelligent Investor.
The biggest obstacle I had to overcome was interpreting the financial statements for investing. To do so, you have to have a firm understanding of accounting.
After all, accounting is the language of business.
Try going to a foreign country and not being able to speak their language. It’s tormenting.
Just because we speak about investments in English, it doesn’t mean it is correct. Learn the business language.
Many books only go as far as telling you to look for companies with low debt and growing cash, but that doesn’t mean much. Anybody can understand business with low debt and increasing cash flow.
However, what does it mean when raw inventory materials is up but works in progress is down?
If the percentage change in accounts receivables grows faster than sales, what does that mean?
These are things that accounting books won’t teach you, because accounting is like a dictionary. It’s the interpretation that brings the language to life.
Writing Difficult Concepts in an Easy to Understand Way
I have been your reader for almost 3 years, and I really enjoy reading your articles. Given English is not my first language, so it is not always easy to understand everything, but your articles have always been very clear and informative.
Is there some advice you could give in terms of how to write things the way you write ?
The question is actually deeper than a basic English question. Follow me through this and you’ll get the point.
- The objective of the question: find out how to write difficult topics that are easy to understand
- Other information: English is not primary language, wants to learn how to write, wants to write in a style that is easy to understand
See what I just did?
Given the information from the question, the objective was identified and then the information is broken down into manageable pieces.
In doing so, I’m trying to take a step back to understand who you are first and what your goals are before getting to the problem.
Just as I’m trying to understand who is sending this email, when writing, you must always start with knowing who you are writing for.
The key is to also understand that it’s never about you. It’s always about the reader.
The objective of this blog is to write for those who want to understand financial mumbo jumbo in a way that they can understand and I write like this because I was in the very same situation so I know how to frame it for the reader that stumbles on this site.
My writing style for the web can be broken down into the following:
- Start with a big idea you want to write about
- Write in a sequence of what should happen – just like a how to manual
- Use lots of headings – more the better
- Write like you talk
- Keep sentences short
- On the internet it is better to have one sentence paragraphs than blocks of text
- Know your material
- Use visuals wherever possible
Believe or not, two of the most popular articles are on accounting topics.
Analyze how I wrote those articles and you’ll see the pattern.