From research analyst to real estate investor, people in the investment sector have to rely on their knowledge of numbers each day. Reading charts, spotting trends, and having a basic understanding of economics, marketing, and business law are all helpful for those just starting out. Today, we look at ways that having an understanding of basic accounting practices can help someone early in their investment career.
Investment opens up a lot of opportunities for career paths. These include investment analyst, associate, portfolio manager, and chief investment officer. People who choose to work in investments may also work in securities trading or investment or corporate banking. Regardless of which direction you think you might take, accounting skills can help you get there.
Earning an accounting degree, which you can do through online colleges for accounting if you are already working and can’t dedicate yourself to going to school full time, can teach you much about money and money management. Just a few things you might learn include:
- Marketing. Marketing is the process by which businesses grow. When you have a fundamental understanding of marketing practices, you will be in a better position to judge which companies are investing in their own growth for the long term. This can help you make better recommendations as an analyst or portfolio manager and spot trends that might indicate that a business is slated for success or failure.
- Business law. Proficiency in business law helps you better understand how the companies you invest in handle legal issues. This is important since it’s possible that legal action can negatively affect the company’s stock. Zacks explains that this isn’t always the case, but it never hurts to have some understanding in this area.
- Economics. When you work in investing, you are tasked with helping others make financial decisions that affect their families. Earning a degree in accounting will help you refine your economic literacy. Further, having an education in economics will put you ahead at the post-high school level since less than half of all high school students graduate with a grasp of the topic.
- Spreadsheets. If you build financial models, you have to get comfortable with spreadsheets well beyond the basics. Honing skills in Microsoft Excel, for example, is crucial for junior analysts.
It’s no secret that investors get information from financial statements when they go to value or perform a credit analysis of a company. Understanding accounting can make it much easier to read these statements. It is also important for investors to know how assets are classified. For example, a company may have X amount of dollars in unused equipment sitting in a storage area somewhere, but these assets have no true economic value that might make the company a more worthwhile investment.
Something else to consider if you’re thinking about taking a class in accounting to further your investment career is that it gives you an opportunity to learn how companies finance their operations. You have to learn how to read much more than a balance sheet, and you should know how to spot possible liabilities, such as long-term leases, which are not required to be reported as debt.
Even if you’re already an expert in investments, it never hurts to increase your awareness of best accounting practices. In doing so, you’ll learn a lot along the way, and you may even pick up a few new tricks on how to truly value a company by reading between the proverbial lines and looking past their stock history.Visit House Hub Real Estate Investments to stay up-to-date on the latest off-market, high-equity South Carolina investment property deals.