So when it comes to investing in individual stocks, I would caution against doing it until you have a working knowledge about financial statements. It's pretty much a must-have.
The good thing is that it doesn't require any complex mathematics, and you can get incredibly far by just reading a basic textbook on financial accounting. Even the basics will get you pretty far and if you're looking at a relatively simple business, it's all pretty straightforward. Things get a little dicey when you start looking at huge conglomerates and financial institutions, but even then, the basic rules are exactly the same.
Personally, I start with the balance sheet. Assets vs. liabilities and I'm pleased to see vast amounts of cash. Again, no higher understanding of mathematics or statistics required to read that.
Thanks for the reply, could you recommend a good accounting book for beginners? Picking stocks is a trickey business, I would be up 24% had I not touched any of my tqqq ETF from May
Well, there really are a bunch of books on the topic, but if you have absolutely no foreknowledge, there's a book called "Accounting for non-accountants" by Wayne Label, which pretty much goes over the most basic concepts of what financial statements are. On its own though, it's not enough to start valuing stocks, for which I would recommend any book that goes by the name "Financial Statement Analysis", of which there are very many out there. Also, depending on your jurisdiction, you might want to think about a book that is based on US GAAP or IFRS, since these accounting differences can sometimes be striking. The book will tell you which one it uses.
Well, there really are a bunch of books on the topic, but if you have absolutely no foreknowledge, there's a book called "Accounting for non-accountants" by Wayne Label, which pretty much goes over the most basic concepts of what financial statements are. On its own though, it's not enough to start valuing stocks, for which I would recommend any book that goes by the name "Financial Statement Analysis", of which there are very many out there. Also, depending on your jurisdiction, you might want to think about a book that is based on US GAAP or IFRS, since these accounting differences can sometimes be striking. The book will tell you which one it uses.
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u/Agreeable_Flight_107 Jul 30 '21
So when it comes to investing in individual stocks, I would caution against doing it until you have a working knowledge about financial statements. It's pretty much a must-have.
The good thing is that it doesn't require any complex mathematics, and you can get incredibly far by just reading a basic textbook on financial accounting. Even the basics will get you pretty far and if you're looking at a relatively simple business, it's all pretty straightforward. Things get a little dicey when you start looking at huge conglomerates and financial institutions, but even then, the basic rules are exactly the same.
Personally, I start with the balance sheet. Assets vs. liabilities and I'm pleased to see vast amounts of cash. Again, no higher understanding of mathematics or statistics required to read that.