How to develop / entertain passion for stocks?
Hi everyone,
I hope this doesn’t sound too stupid: I’m an IBD analyst 1 and I have a growing interest for hedge funds, I’m starting my preparation for interviews.
My problem: I don’t have a special passion for stocks, I’ve never invested in stocks. I find stocks interesting, I’ve already followed movement of few stocks punctually but never on a large bucket of them.
I understand that a HF research associate should be more concerned that than by stocks and I genuinely would like to develop further interest - it would obviously help me in my future work and to prepare for interview (stock pitch).
I regularly have a look at financial news etc. But everything is super high level.
Would you have advice on how to develop and entertain a passion for stocks?
Ps: my interest for HF comes from the fact that I want to be able to analyse companies by creating my own models with my own assumptions (vs assumptions given by MD in IBD).
I don’t want to have a client (I don’t like waiting for instructions, I would rather work for myself and be lot more efficient than in M&A).
I’m not really interested in PE because this is very slow, you do lot of process at junior level, you have to monitor companies that can be extremely painful.
Finally, I really don’t like IBD when it comes to meritocracy, as it seems that you have to pretend to like everyone to be successful (I don’t like networking, it seems so fake - I’m only interested in doing my work and learn things). At a HF, you can do you work on your side and the performance of the stocks you picked is the true indicator of your success.
It may seem very naive and stupid, but I’ve been reading a lot of books about HF recently and I just feel this would fit me better. I also hope I don’t sound like an antisocial jerk.
Simple - start investing your own money, and see if you like it.
As an analyst in IB I don’t have right to freely trade stocks - and it is extremely painful to navigate through compliance approval layers …
Do you have an app / website in mind where we can invest « fake « money ?
I am sure there are, but you can just build a Google Sheet paper portfolio. Track what price you bought it, how much you bought, track return you generated. Google Sheet has Google Finance formulas that can pull market prices and stuff. Nothing complex.
Tradingview has its own paper trading platform on the "Trading panel tab"
TD ameritrade has a paper trading platform with options but you need to open an account with them to get real time updates
webull also has it
There are many paper trading websites but truth be told, many people don't take those seriously and risk money they wouldn't have risked in an actual account.
I think about when I first started watching basketball. I hated it but a lot of my friends were on the basketball team at my university, played 2K, etc. So as I started to learn the stats, I understood the game and enjoyed it more. Then I used to haul my ass out to the court an hour every morning to practice alone which totally sucked. But after about 3-4 months of this I got decent enough to play pickup and could actually participate. So then knowing the stats, knowing how to play, having friends in the space. I was plugged in. So at that point it wasn't about going from unknown entity to known entity, it was about participating in the known entity in ways that I chose to, which was cool and fun. I think there's some psychology behind this about how you gravitate towards things more once you know them and like them but my .02 to you would be just put in the work to analyze a couple stocks, do the modeling, think about the thesis, put some money to work, do this for 6 months with all your free time (or what you can stomach). And then if you find, once you're in it, that you like it, that's as good of an indicator as you are going to get.
WoW this is an amazing parallel! It makes a lot of sense, and makes me understand that I actually have to force myself a bit at the beginning to get involved, and then this should help develop a genuine interest.
And I guess that if after few months I don’t like it, I should reevaluate my career choices.
Thank you very much, I’m very grateful for this!
My tip: the “stocks” description is extremely broad and can easily get overwhelming— so many different strategies, let alone sectors/industries, geographies, market caps, etc. Instead of just broadly investing in anything, pick one specific vertical to focus on for some time. For example, only look at small cap US industrials. Or only medical office building REITs. Pick something that sounds interesting to you and try to outperform the rest of the sector. Or strategy— maybe you want to focus and learn about spin offs or risk arb. Based on what ib group you’re in, maybe you have an edge in that area. (Others might disagree with this approach, but I think it’s helpful to try something specific rather than aimlessly try everything)
Tip #2: block off some time, 20-30 min, every single day for investing. Skim a 10k every day. Just do something to learn a little bit more than you knew yesterday
This is fantastic advice. I'm not in a fundamental investing role right now, but interviewed for several and got an offer at one.
Take 30-60min per day to read a 10-k (business overview, risk factors, md&a, financial statements, and footnotes) and then build a quick and dirty model trying to come up with a value for the company. Start with a few companies in an industry you're interested in and go from there. The important thing here is consistency - make sure you do this as often as you can, at least 3-5 days per week. Knowledge compounds quickly.
Guys, thank you so much for these advice that are super valuable!It makes a lot of sense to have this active approach, I think I totally omitted this so far.In terms of modelling, which degree of precision should I try to develop? I understand that a basic 3-statement model could do the trick, as the key challenge sits in thé assumptions / key drivers for thé top lines (revenues and COGS)?Thanks a lot again !
Edit: regarding valuation, i guess DCF / DDM make sense ? + trading comps
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