To become an experienced financial analyst, it takes more than just a certificate on the wall in your little office. It takes years of accumulated experience and passing through some ups and downs along the way. Twenty years ago, my first job was a financial analyst at a multi-million-dollar hedge fund. This is where my career kicked off and my work ethic was nurtured.
It first starts with data collection through which the financial analyst learns two key things. The first is not to take “No!” for an answer, and the other is that “the squeaky wheel gets the oil”. In sum, this means the astute financial analyst does not rest but is always on the lookout for more data to collect to better the analysis. Granted, one cannot exhaust all possible data sources, but the more data one collects, the higher the chances the outcome will be more insightful.
Next, comes the data analysis part, where the financial analyst does what his title purports: analyze! There is no a comprehensive set of guidelines teaching one how or what to analyze. Indeed, the analysis is a talent nurtured by experience. I remember my first boss asking me to write a 5-letter word and keep it before my eyes at all time. The word was “Think” which will convert analyzed data into processed information.
The third step to becoming a financial analyst involves forecasting future performance based on historical trends and detailed business plans. It is in this stage where the financial analyst starts to connect the dots. He or she starts putting the pieces of the puzzle together to create a meaningful picture. It is an engineer trying to understand the mechanics of a machine he uses. To do so, he breaks the machine down into pieces then try to put it all together again. Only then will he really understand how the machine works.
The ultimate goal for any financial analyst is to implement the analysis in real life with real money, otherwise known as “money management”. Doing this can be by personally managing his or her own money or other people’s money. At the end of the day, it will involve comparing risk tolerance vis-à-vis the return objective before allocating funds across the different global asset classes.
Throughout the journey, one can never forget the impact some bosses had on one’s career as a role model and continued guidance. At some point in one’s life, the torch has to be passed on as well to the next generation. This is the essence of evolution we should be experiencing in the financial analysis field.