So I have been asked twice in the past week by ambitious young monkeys "What are the best sources to learn to build a". The problem is these guys are only freshman and sophomores in college. A FINANCIAL MODEL IS USELESS UNLESS YOU HAVE A STRONG UNDERSTANDING OF ACCOUNTING, and . Until you have been at least through intermediate accounting and taken at least corporate finance, I highly suggest you spend your time on other things that are better value added to your development.
You young guys think a financial model is this magical thing and knowing how to do it will all of a sudden make you a great investor/financier. What you don't know is that a financial model is simply a tool for us to use to back up our qualitative assumptions of the company. A model is only as good as the assumptions that are made, and these assumptions are developed by knowledge of the business, how it generates revenue, and how market and economic factors will impact the business.
What should you do instead?
READ!! READ!!! READ!!!
1. Before you learn the technical skills of finance, you should develop your qualitative finance skills.
Every freshman and sophomore on this board that wants to go into investments should get a subscription to the Wall Street Journal. Read it for 20 minutes a day so you can learn how the markets work, what drives the market, how do different businesses operate, what drives the economy. Building a knowledge background about the markets and how it operates will make you twenty times more qualified to a potential employer because you actually sound smart. Read articles on other sources like Seeking Alpha, this forum, Fortune, Forbes etc...
2. Read books about the industry you want to go into.
If you want to go into Investment Banking, I highly suggest you read books about the industry so you know what you are getting yourself into. You can start withand Liar's Poker are a good start.
What if I don't like to read?
Well what you don't know is that reading is crucial to this industry. Constantly everyday a real investment professional is constantly reading about the markets, the companies they are following, and the industry they are doing work on. If you don't have a natural curiosity then it will be tough for you. However, you can develop that curiosity by reading.
So when do I start to learn modeling?
You can begin to learn modeling after you have completed at least three accounting classes and taken at least two finance classes. For most people this is sometime in Junior year. Then you will have the basic background to build and understand a financial model. The knowledge base you will have built from reading will supplement this greatly and you will be a rock-star candidate for IB/internships Junior Year. Good luck monkeys.
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