Skip to content

Bettering circle of competence

January 10, 2013

Financial Businesses are my blind spots. I can’t visualize them. I can’t understand the difference between one financial business and another. However I am a little better with brick and mortar companies. To further add to the woes, the sector almost always is so mired in regulations that understanding the source of sustainable competitive advantage is a worthy edge in itself. On top of that, worthy literature on investment in financial stocks is few and far in between.

Thus for me, it had been a tough situation to understand the challenges, threats and opportunities in financial businesses. However recently I came across a few ideas to really have an insight into this sector of the economy. And I would suggest anyone wishing to improve his circle of competence to take up the following:

  • In US, the major financial companies which are public are- Goldman Sachs, Morgan Stanley,Wells Fargo etc. Dig up the 10-K and 8-K reports for one of their business cycles-here credit cycle and do thorough reading of them.
  • Give yourself a rest and try to write on the potential drivers of this business and how one should go about valuing it.Make sure you write it.
  • Google up Aswath Damodaran’s work on valuing financial stocks. That is the feedback on your understanding.
  • Take a rest, and write some more on your understanding. Reread Aswath Damodaran’s work again.
  • Google up famous investors logic on investment in companies in this business. Bruce Berkowitz’s interview to Outstanding Investors Digest in 1992 is a classic, so is Buffet’s article to OID titled “A security I like”. Read them multiple times.
  • Take a rest. Write again.
  • Now read the regulations of India: In this case- Economic Survey, RBI website and budget and white papers will be helpful. Google is your guide here.
  • Now read the annual reports of the big leaders in this space.

This is a long drawn out process. It will take time for the ideas to get cooked. For me as I understand, it will take about 2 years which is a good reasonable time to “have a grip” on the dynamics of this business and another 2 years of understanding and analysing it. Of course one may get a headjump if someone is there to hasten up the second installment of 2 years, but it will take atleast 2.


3 Comments leave one →
  1. Proverga71p permalink
    February 12, 2017 7:56 pm
    Looking for a new or used car might be a hard procedure should you not know what you will be undertaking. By teaching yourself about vehicle shopping prior to head to the dealer, you possibly can make stuff easier for yourself. The following advice can help your upcoming shopping journey be enjoyable.

    Usually take a auto mechanic along when looking for a whole new motor vehicle. Auto dealers are popular for offering lemons and you may not desire to be their up coming patient. Whenever you can not have a technician to consider autos together with you, at least make sure that you have him evaluate your last selection before you buy it.

    Know your boundaries. Before you start store shopping for your next auto or vehicle, make a decision how much you can manage to pay, and adhere to it. Don’t overlook to add desire for your estimations. You can expect to spend about 20 percent as a down payment too, so prepare yourself.

    Before visiting a dealer, know which kind of automobile you desire. Research most of you alternatives prior to store shopping so you can evaluate which works the best for your finances and family members requirements. Shop around to determine just how much you should be paying for a probable auto.

    Before you sign any contract make time to go through each series, for example the fine print. If there is nearly anything shown you do not understand, will not indication before you get an solution that you simply understand. Unsavory salesmen can make use of a binding agreement to place many costs that had been not talked about.

    Should you maintain the previous advice in your mind when which you go purchasing a car, you will end up very likely to get a better deal. Getting a car lacks to become frustration. Use the ideas out of this report and you can get the automobile you desire in a very good value.

  2. January 12, 2018 4:07 pm

    Hi new project
    relief matter anime dc bakrid

  3. March 24, 2018 10:29 pm

    Offriamo servizi per costruzione siti web

    Cari colleghi,

    Web Studio Paolo Vetlucci offre vi servizi per produzione di siti web.

    quanto costa un sito web il nostro Studio prodotto gia piu 6 anni. questo e molto grave termine si acquisito significativa experience, che consente di te aiuta a ci vendere fare grave IT.

    Noi creare solo adattivi siti.

    necessario iniziare lavorare con nostro Studio per ottenere tutti i vantaggi e verificare la differenza.

    Aspettiamo te tra i nostri clienti felici.

    Con i migliori saluti,
    azienda Paolo Vetlucci Ltd.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: