Financial Statement Analysis of an Established Business

The stock selection process involves a large component of expectations.

The investor is usually a student of the intrinsic value and relative value, and he incorporates projections routinely into stock evaluations.

In order to form a reasonable basis for predicting corporate performance, however, the investor must understand historical financial results.

The business review enables the practitioner to attach product innovations, competitive struggles, and other qualitative items to changes in sales and earnings.

As the numerical complement to the business review, the financial analysis provides a statistical summary of the company's past by boiling it down to the common denominator of all profit-seeking enterprises - dollars and cents.

Model Research Report

1. Introduction
2. Macroeconomic Review
3. Relevant Stock Market Prospects
4. Review of the Company and Its Business
5. Financial Analysis
6. Financial Projections
7. Application of Valuation Methodologies
8. Recommendation.

Notes:

To a large extent, financial statement analysis is a lost art.  Few business schools stress the topic, and MBA students who major in finance, graduate with only a rudimentary knowledge of accounting, the nuts and bolts of financial statement analysis.

Wall Street and the institutional community deemphasize a careful study of prior financial results.  Research departments are so preoccupied with predicting future earnings that they don't take time to scrutinize past accounting data.  Furthermore extensive analysis is an expensive proposition.

With most institutions owning hundred of stocks and turning over their portfolios two to three times annually, placing a lot of effort in studying the financial statements of a single holding is not worthwhile.

Step-by-step approach to financial statement analysis

1. Begins with organizing the raw information
2. Calculating ratios and interpreting them.
3. Integrate this with the industry-specific performance ratios to make conclusions about a firm's earnings power moving forward.
4. The historical analysis sets the stage for projections, an important component of business valuation.

Insist on value when you buy (Buy when EXTREMELY undervalued and Sell when EXTREMELY overvalued; with good resons)

A stock has three prices. It has:

1. a market price, 
2. a book value and 
3. an intrinsic value.

The market price is easy to understand. It is the last traded price at the end of a trading day. 

The book value is simply the net tangible asset (NTA) as shown in its balance sheet. 

The intrinsic value is the most difficult to calculate. I do not know of any formula for this. At most, it is only an estimation. 

You have to factor in many metrics such as barrier of entry, calibre of management, earnings potentials (present and future) growth prospects, patents, etc.


So, what should we do? 

For me, I make it simply. I look at the track record relative to its earnings, earnings growth and dividend yields. The higher these are, the higher the value. 

Buying a stock at high earnings per share (PE) is risky. Unless the forward PE is  expected be much lower, avoid stocks trading with high PE. (A PE of over 16 is too high for me.) 

To value a stock, here are some metrics or key ratios to consider: 

• EPS( earnings per share); 
• D/Y (dividend yield); 
• NTA (net tangible assets); 
• PEG (price to earnings growth); 
• NPM (net profit margin); 
• ROE (return on equity); 
• D/E (debt to equity ratio) 
• C/R (current ratio); 
• PCF (price to cash flow). 

One other thing to carefully consider is the core business of the company. Here, you need to think about barrier of entry, patents and competition.






When is the best time to sell a stock

Close to 100% of all stocks will at one time or another be selling at extremely high valuation that they should be sold. 

At other times, they will be selling at overly undervalued prices that they should be bought. 

We want to sell a stock when it is very much overvalued.

Understanding the value of a stock is crucial in this respect, and with the help of technical analysis, you have the advantage of the competitive edge.





Control your emotion

Taking action for action sake is a weakness that many people fail to control. Some people need to move in and out of the market often enough to overcome boredom.

They forget that transaction costs eat into their earnings.

Buy and sell with good reasons and not simply with intuition and the need for action.

Following the guidelines mention above will go a long way to help you to invest intelligently

CFA Level I 2014 - Reading 56, Part 1: Introduction, Credit Risk & Capital Structure

https://www.youtube.com/watch?v=H5z2TPjZN5Q&list=PLJnX_Qm2u8ejcXIF1ystPaIOibAT9E8Cg

CFA Level I 2013 - Intensive Review Seminar - Financial Reporting and Analysis

https://www.youtube.com/watch?v=ZXolfaMmLwY




Lecture 22  Finacial Statement analysis
Lecture 24  Financial Reporting Standards 0.41.00
Lecture 25
Lecture 26  Understanding Balance Sheet 1.57.00
Lecture 27
Lecture 28  Financial Analysis Techniques (Ratios) 2.49.00
Lecture 29
Lecture 30  Long Lived Assets PPE & Intangibles 3.59.00
Lecture 31  Income Tax  4.46.00
Lecture 32  Non-current (Long term) Liabilities  5.53.30
Lecture 33  Red flags and accounting warning signs  6.52.00
Lecture 34  Accounting Shenanigans of the Cash Flow Statement  6.58.30
Lecture 35  Financial Statement Analysis:  Applications  7.02.00

How to Value a Stock in Order to Buy Long or Sell Short?

How to Value Stocks

The Intelligent Investor Benjamin Graham Audiobook

https://www.youtube.com/watch?v=SOZL99qriLE

The Next Financial Crisis In 2015 China Property Bubble Tipping Point

Global Financial Crisis: Documentary on Why the World Faces Financial Meltdown

Published on Oct 5, 2014

http://www.learncurrencytradingonline... This documentary shows why we face a global financial crisis and looks at past financial meltdowns such as 2008 and before to show we face a global financial meltdown again in the future, The documentary is one of the best at looking at the causes of stock market crashes and explaining why another is probably inevitable - what are the solutions? Well there are easy solutions but Governments and central banks are ignoring them and leading the global economy into crisis - a frightening look at what could happen in the near future in the global economy. Debt is to high, banks are run in a reckless fashion all encouraged by the central banks and governments.

Goldman Sachs CNBC Documentary: Trading Techniques of an Investment Bank

The Last Days Of Lehman - Margin Call Full Movie & Film

The Science of Getting Rich - George Soros The Alchemy of Finance

https://www.youtube.com/watch?v=hJ-zUzR994s

History of George Soros

The Science of Getting Rich - Common Stocks And Uncommon Profits Philip Fisher (Audiobook Full)

https://www.youtube.com/watch?v=ZYgELDTE61Q

The Science of Getting Rich - Secrets of Great Investors Peter Lynch

Peter Lynch's 25 Golden Rules of Investment

Peter Lynch on Fidelity Investments

Making Money in the Stock Market: Peter Lynch on Investing in the U.S. Economy (1994)

How Peter Lynch earned 29% a year for 13 years.

Warren Buffett the Teacher

Buffett - The making of an American Capitalist (Roger Lowenstein)***

https://www.youtube.com/watch?v=7nXDyOfmj34

Tracking Warren Buffett's Berkshire Hathaway Portfolio - Q1 2015 Update

During Q4 2014, Berkshire Hathaway's (NYSE:BRK.A) (NYSE:BRK.B) US long stock portfolio decreased ~2% from $109.37B to $107.13B. The top-five positions account for over two-thirds of the portfolio: Wells Fargo (23.88%),Coca-Cola (15.14%), International Business Machines (11.92%), American Express (11.06%), and Wal-Mart (4.64%). There are 45 individual stock positions many of which are minutely small compared to the overall size of the portfolio.

Warren Buffett's writings (pdfs) are a treasure trove of information and are a very good source for anyone starting out on individual investing.

New stakes:

None.

Stake Disposals:

None.

Stake Increases:

International Business Machines (NYSE:IBM): IBM is Buffett's third-largest stake at 11.92% of the portfolio. The original position was purchased in Q3 2011 at prices between $157.54 and $185.21. Since then, the stake has gone up by almost 40% through periodic purchases. Last five quarters have seen minor buying and the stock currently trades at $173. Berkshire's cost-basis on IBM is at around $170. Buffett is very bullish on IBM and controls ~8% of the business. For investors attempting to follow Buffett, IBM is a very good option to consider for further research.

Deere & Company (NYSE:DE): DE stake was first acquired in Q3 2012 when around 4M shares were purchased at prices between $75.11 and $82.70. The position remained steady until Q3 2014 when an additional ~3.6M shares were purchased at prices between $82 and $91.38 - Berkshire avoided disclosing DE stake in Q3 2014 by making use of the "section 13(f) Confidential Treatment Requests". Last quarter, the position was increased by another 125% at prices between $80 and $91. This quarter saw a marginal increase. The stock currently trades at $89.13. The stake is at 1.42% of the portfolio and Buffett controls ~5% of the business.

Phillips 66 (NYSE:PSX): The 2% of the US long portfolio PSX stake as of Q4 2013 was reduced to a 0.71% stake in Q1 2014 at prices between $70.67 and $80.35. The position was further reduced by one-third the following quarter at prices between $76.69 and $86.33. This quarter saw an about-turn: ~14% increase at prices between $59 and $80. The stock currently trades at $81.05. Berkshire's cost-basis on PSX is much lower.

Precision Castparts (NYSE:PCP): PCP has seen steady buying in the last two quarters. Q4 2014 saw a ~37% increase at prices between $218 and $243 and this quarter saw another ~47% increase at prices between $200 and $241. The stock currently trades at $216. The stake is still very small at 0.82% of the US long portfolio.

Twenty First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA): FOXA is a minutely small 0.20% of the US long portfolio stake established last quarter at prices between $31.77 and $39.01 and increased by ~31% this quarter at prices between $32.80 and $38.40. The stock currently trades at $33.99.

US Bancorp (NYSE:USB): USB, a 3.41% stake has been in the portfolio since 2006. The position was tripled during the 2007-2009 timeframe and since then was reduced by around 15% overall as of EOY 2012. In Q2 2013, ~17M shares were purchased at prices between $32.27 and $36.15. This quarter saw a 4.57% increase at prices between $40.94 and $45.12. Berkshire's cost-basis on USB is ~$32 and the stock is trading well above that price at $43.93. Buffett controls 4.7% of the business.

Wells Fargo & Co. (NYSE:WFC): WFC is Buffett's largest stake at 23.88% of the US long portfolio, well ahead of Coca-Cola (NYSE:KO) which is at 15.14%. This quarter saw a ~7M share stake increase at prices between $50.72 and $56.17. The previous significant activity was in Q2 2013: over 18M shares were purchased at the time at prices between $34.66 and $38.20. The stock currently trades at $55.52. Berkshire's average cost-basis is at around $25.

Stake Decreases:

Bank of New York Mellon Corp (NYSE:BK): BK is a 0.78% of the US stock portfolio stake. The bulk of the original position was purchased in Q2 2012 at prices between $19.51 and $24.67. The stake was increased by 30% in Q2 2013 at prices between $26.70 and $30.55 and since then had been kept relatively steady. Last three quarters have seen a combined ~16% reduction at prices between $35.95 and $41.53. The stock currently trades at $43.09.

Charter Communications (NASDAQ:CHTR): CHTR is a 1.08% of the US long portfolio position. It was established in Q2 2014 at prices between $118 and $158 and more than doubled in Q3 2014 at prices between $151 and $164. Last quarter saw a further ~25% increase at prices between $140 and $170. This quarter saw a minor ~3.5% reduction. The stock currently trades at around $181.

National Oilwell Varco Inc. (NYSE:NOV): NOV is a minutely small 0.09% of the US long portfolio stake. The original position was established in Q2 2012 at prices between $60 and $80.67. It was increased by ~19% in Q2 2013 at prices between $64.14 and $71.57. Last four quarters have seen a combined ~78% reduction at prices between $47.46 and $65.53. The stock currently trades at $51.27.

NOTE: The implied performance of this position by the prices quoted above is negatively skewed because of the effect of National Oilwell Varco's NOW Inc. spinoff. The terms called for NOV shareholders to receive one share of NOW Inc. for every four shares of NOV held.

Liberty Global PLC (NASDAQ:LBTYA) (NASDAQ:LBTYK): The minutely small 0.25% position in Liberty Global established in Q4 2013 at prices between $37.50 and $44.50 (adjusted for the 03/2014 stock-split) was increased significantly to a 0.57% position in Q1 2014 at prices between $40.37 and $46. The stake was further increased by ~17% in the following quarter at prices between $38.49 and $45.61. Last two quarters had seen marginal buying while this quarter saw a marginal reduction. The stock currently trades at $49.43 and the stake is at 0.84% of the US long portfolio.

MasterCard Inc. (NYSE:MA), Viacom (NASDAQ:VIAB), Visa Inc. (NYSE:V), & Wabco Holdings (NYSE:WBC): These are very small (less than ~0.60% of the US long portfolio each) stakes that were decreased marginally this quarter. Berkshire controls 6.6% of Wabco Holdings.

Kept Steady:

Restaurant Brands International (NYSE:QSR): QSR is a 0.30% of the US long portfolio position established last quarter at prices between $35 and $42. The stock currently trades just outside that range at $42.14. The stock started trading in December 2014 following a merger/rename transaction between Tim Hortons and Burger King Worldwide - QSR has already increased ~22% since the first day of trading (12/10/2014). There was heavy activist involvement previously and the latest filing show Bill Ackman directly owning 38M shares (18.80% of business). Berkshire's stake in the business is at around 4.2%.

Suncor Energy (NYSE:SU): SU is a small 0.61% of the US long portfolio position first purchased in Q2 2013 at prices between $27.40 and $32. Last year saw a ~24% increase at prices between $27.74 and $43.08. The stock currently trades at $30.42.

DaVita Inc. (NYSE:DVA): DVA is a 2.93% of the US long portfolio position that was aggressively built-up over several quarters: the original stake was doubled in Q1 2012, increased by over 50% in Q2 2012, 24% in Q4 2012, and an additional 16% in Q1 2013. There has been marginal buying since. The bulk of the stake build-up happened at prices between $30 and $49. The stock currently trades at around $81.48. In May 2013, Berkshire's Ted Weschler signed an accord with DVA, limiting open-market purchases to 25% of the company- the position is currently at 17.9% of the business.

DIRECTV (NASDAQ:DTV): DTV is a 2.49% position first purchased in Q3 2011. The bulk of the current stake was purchased in Q4 2011 at prices between $40.60 and $47.87. In Q2 2014, the position was reduced by around one-third at prices between $74 and $88.25. In Q3 2014, the pattern reversed: a ~28% stake increase at prices between $83.55 and $87.72 and that was followed with a ~5% increase last quarter at prices between $82.56 and $87.89. The stock currently trades at around $91.46. AT&T (NYSE:T) is in the process of acquiring DTV in a $95 per share cash-and-stock deal ($28.50 per share cash and the rest in stock protected with a collar).

General Motors (NYSE:GM): GM is a 1.44% of the US long portfolio position that was first purchased in Q1 2012 at prices between $21 and $30. The stake was increased by 60% in Q2 2013 at prices between $27.53 and $35.03. Q1 2014 saw a 25% reduction at prices between $34 and $41 and in the following quarter there was an about-turn: 9.86% increase at prices between $31.93 and $37.09. Q3 2014 saw another ~21% increase at prices between $31.94 and $37.97 and last quarter saw a marginal increase. The stock currently trades at $34.91.

American Express (NYSE:AXP), Coca-Cola, and Procter & Gamble (NYSE:PG): These are very large stakes that were kept steady during the last two years. Buffett has said these positions will be held "permanently". Berkshire's cost-basis on AXP, KO, and PG are at around $8.49, $3.25, and $6.40 and ownership stakes are at 14.8%, 9.2%, and 1.9% respectively.

Chicago Bridge & Iron (NYSE:CBI): CBI is a 0.57% of the US long portfolio position that was increased by 47% in Q2 2013 at prices between $50.92 and $63.75. Last quarter saw a 12% stake increase at prices between $65.51 and $87.65. The original position was purchased in Q1 2013 at prices between $46 and $62. The stock currently trades at $55.01. Berkshire controls 9.9% of the business. For investors attempting to follow Berkshire, CBI is a good option to consider for further research.

Goldman Sachs (NYSE:GS): GS is 2.22% of the US long portfolio stake established in Q4 2013. Berkshire Hathaway received $5B worth of warrants to buy GS stock during the financial crisis (October 2008) at a strike price of $115 (43.5M shares) that was to expire October 1, 2013. Buffett exercised the right before expiry to start this long position. GS currently trades at $203.

Liberty Media (NASDAQ:LMCA) (NASDAQ:LMCK): LMCA is a petite 0.43% stake first purchased in Q4 2011. It was increased by ~75% in Q1 2012 and roughly doubled the next quarter. Q2 2014 saw a ~24% stake reduction and since then has been kept steady.

Moody's Inc. (NYSE:MCO): MCO is a 2.39% of the US long portfolio stake that was decreased by 14% in Q2 2013 at prices between $52.23 and $68.62. The stock currently trades at $110. Buffett's cost basis is ~$10 and so he is sitting on large long-term gains on the ten-bagger. The stock returned around 48% in 2013, 23% in 2014, and another ~13% so far this year. Berkshire controls 11.5% of the business.

USG Corporation (NYSE:USG): USG is a very long-term holding and there was a significant 21.39M share stake increase in Q4 2013 due to conversion of notes at $11.40 per share - Berkshire acquired the convertible notes during the financial crisis (2/2009) and USG opted to redeem them on 12/16/2013. Q2 2014 saw a ~11.5% stake increase at prices between $29.57 and $33.16. The stock currently trades at $28.10. Buffett controls around 27% of the business and overall cost-basis is at around $19.

VeriSign Inc. (NASDAQ:VRSN): VRSN was first purchased in Q4 2012 at prices between $34.15 and $49.48. The position was more than doubled in Q1 2013 at prices between $38 and $48 and another one-third the following quarter at prices between $44.39 and $49.27. Q1 & Q2 2014 also saw a combined ~17% increase at prices between $47 and $63. The stock currently trades at $64.09. The current position is at ~10% of the business although as a percentage of the portfolio the stake is still very small at 0.81%.

Verizon Communications (NYSE:VZ): VZ is a small 0.68% of the US long portfolio position established in Q1 2014 at prices between $46 and $49.30. It was increased by ~36% the following quarter at prices between $45.94 and $50.05. The stock currently trades at $49.79.

Wal-Mart Stores (NYSE:WMT): WMT stake was first purchased in 2005. It has since been built up to a 4.64% position (top-five stake). The position was increased by 4% in Q1 2013 at prices between $68 and $75 and another 17% in Q1 2014 at prices between $72.66 and $78.91. The stock currently trades at $79.24. Berkshire's cost-basis on the position is at around $56.

Costco Wholesale (NASDAQ:COST), General Electric (NYSE:GE), Graham Holdings (NYSE:GHC), Johnson & Johnson (NYSE:JNJ), Kraft Foods Group (NASDAQ:KRFT), Lee Enterprises (NYSE:LEE), M&T Bank (NYSE:MTB), Media General (NYSE:MEG), Mondelez International (NASDAQ:MDLZ), NOW Inc. (NYSE:DNOW), Sanofi (NYSE:SNY), Torchmark Corporation (NYSE:TMK), United Parcel Service (NYSE:UPS), Verisk Analytics (NASDAQ:VRSK), : These are minutely small positions (less than ~0.5% of the portfolio each) kept steady this quarter. Although the relative size of the position is small, it should be noted that Berkshire controls 3.6% of Media General. The DNOW position was established in Q2 2014 as a result of National Oilwell Varco's spin-off of its distribution business. Also, per the annual report, Berkshire has a $2.03B position in Sanofi - so in addition to the 13F securities listed in the spreadsheet, Berkshire also owns Sanofi securities listed in Euronext Paris. The only other large non-US individual stock position reported in the AR is Munich RE at $4B (11.8% of the business).

Note: Tesco plc (OTCPK:TSCDY) was another position listed in the 2013 annual report. Berkshire liquidated that stake in 2014: sold 301M shares and realized $444M in losses.

http://seekingalpha.com/article/3188926-tracking-warren-buffetts-berkshire-hathaway-portfolio-q1-2015-update?auth_param=ii05t:1algnhc:3c52ec511450202061d175f0e7d641b4&uprof=44

Is McDonald's Losing Its Economic Castle?

May. 17, 2015 6:35 PM ET  |  7 comments  |  About: McDonald's Corporation (MCD), Includes: BWLD, CBRL, ZOES

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Summary

• Is there really much to like about McDonald's anymore?
• Let's walk through its challenges, and whether it means the company's Economic Castle is deteriorating.
• We give our high-level thoughts on the turnaround plan and disclose our fair value estimate of shares.
• We also have some interesting ideas at the end of the article that many may be overlooking.

What in the world is an Economic Castle?

Berkshire Hathaway's Warren Buffett has popularized the concept of an "economic moat," perhaps best described in common language as sustainable competitive advantages. But an Economic Castle? Are we just confused?

In short, no.

Whereas economic moat analysis focuses on the duration of a company's economic profit stream, as measured by return on invested capital less the costs of which to attain that capital, economic castle analysis focuses on the magnitude of economic profit creation over the realizable near term.

Unlike the substantial duration risk inherent to predicting economic profits 20, 30 or more years into the future, the economic castle framework posits that the strongest performing companies during certain phases of the economic cycle will be those that generate the most economic value over the foreseeable future.

http://seekingalpha.com/article/3190106-is-mcdonalds-losing-its-economic-castle?auth_param=ii05t:1ali5us:13045f7ae0127a1efc301785d852f4b2&uprof=44

Warren Buffett’s Best Advice for 2015. Essentially a good review of and reliving the post 2008 GFC.

Published on 26 Dec 2014

Warren Buffett’s Best Advice for 2015

Warren Buffett says:

“My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.”



Comment:

Listening to this video gives you a good review of financial crisis and stock market volatilities post-2008 GFC.  The video is a collection of live interviews of Buffett during this period and gives a good review of the unfolding crisis with Buffett's live responses to the crisis as it unfolded.

Were you frightened out of the market or you embraced the market during this period?

Warren Buffett shared his thinking of the stock market and other asset classes during this crisis period generously, and today, in 2015, his approach and philosophy are sound, safe and first class;  proven to be absolutely right and rewarding.

A lot of great lessons to learn in this video.


For those looking at buying first single family home, here was Buffett's advice in 2012.
This was the best time for you to buy.   Maybe different in 5 years from then.
Certain conditions need to be fulfilled:
- you should know where you are going to live.
- you must have a reasonable income.
- single family home can be bought with a 30 years mortgage at low interest rates of 4%.

Don't buy:
- if you are going to move in 6 months time.
- if you are uncertain about your job situation.

These are simple and common sense first class advice from Buffett.

Buffett is optimistic that single family homes will double in value over a very short period during his interview.
He is tempted to do this business but it would be extremely difficult to manage so many single units of homes and also dealing with so many people with difficult behaviours.

(@1.40 of video)



Additional note:

For those who are in their 50s or more, you may ponder over this particular fact.  Buffett first invested in shares at the age of 11 years old.  His present networth is about $70 billion.   1% of his wealth were acquired in the first 50 years of his life; the other 99% after his 50th birthday.

Once you have your initial capital and is on the growth path, the power and magic of compounding over many years can do wonders.

Always buy income generating assets as they will definitely beat any non-income generating assets over the long term and less subjective to prices offered and set by another based on sentiment (speculating).



Buffett:  When the market is down, I'm happier buying

Buffett:  Stock market, generally, is best place to have money

Warren Buffett started investing at 11yo and he regrets not starting earlier!!! What is also not widely known is that he made 95% of his money after the age of 65 years old!!! There is hope for us, old folks. Hahaha. But then again, we can't all be Warren Buffett.

Your Cheat Sheet to Financial Professionals

•   
• By Henry Truc
 
• October 12, 2010

What is a financial professional? The term loosely covers anyone that works in an industry dealing with, well, finance. This could be someone as prominent as a stock broker on Wall Street or someone as common as your local insurance agent or tax accountant. Knowing the area of expertise each one deals with will help you pinpoint the right hire to help you meet your financial goals. After all, you wouldn’t have your insurance representative do your taxes or your CPA accountant picking your stocks.

The following is a simple break down of five of the most common industry professionals working in finance. While some responsibilities do blend together and some professionals do double dip in expertise, this guide should help clarify where each professional fits in the world of finance.

Financial Planner

While their services vary widely, most financial planners review the whole of a client’s monetary situation and devise a strategy for accomplishing their savings, debt and investing goals. They also help serve as an investment manager to plan for major expenditures like retirement, college or a home purchase. They may make recommendations for investment products and services that will assist in achieving these milestones.

Credentials: The most common certification that designates a qualified financial planner is a CFP credential. In order to become a Certified Financial Planner, a person must hold a Bachelors degree, obtain at least three years of financial planning experience, complete a CFP Board-Registered Education Program and pass a three-part, 10-hour exam. Continuing education is required to maintain certification.

Skills:

• Strong interpersonal skills
• Sales ability
• Familiarity with legal restrictions and laws regarding retirement plans, tax shelters, insurance and trusts
• Understanding of complex mathematical concepts, budgets and financial and legal documents

What to Look for: There is no state or federal law that requires a person claiming to be a financial planner to actually be certified. For this reason, you should only hire a professional that has credentials and can provide references.

The CFP Board can be contacted regarding inquiries about particular individuals. In addition to receiving certification, qualified financial planners are registered with the SEC or the state securities commission where the business is located. You should also determine if your financial planner has taken a fiduciary oath to “to act in good faith and in the best interests of the client.” Financial planners are either compensated through fee-only or commission structures.

Financial Analyst

Financial analysts are also known as security analysts or investment analysts. They work for banks, insurance companies, securities firms and other institutions examining financial data to help a company and their clients make investment decisions. The primary duty of most financial analysts is to perform extensive research, write reports and create presentations based on these results to aid in determining the value and appropriate action on investments.

Credentials: It’s recommended that analysts obtain a Masters degree in business administration (MBA) in addition to their Bachelors degree. Analysts may also receive certification by the CFA Institute in the form of a Chartered Financial Analyst designation.

In addition to holding a degree, Chartered Financial Analyst candidates are required to pass three exams that cover topics like accounting, economics and security analysis, and have four years of qualified, professional work experience. CFA charterholders are also obligated to adhere to a strict Code of Ethics and Standards.

Skills:

• Analytical, mathematical and problem-solving skills
• Advanced knowledge of statistical software and spreadsheets
• Ability to communicate complex financial ideas simply
• Motivated to seek out obscure information
• Possesses in-depth knowledge of the economy, tax laws and markets

What to Look For: Financial analysts are generally employed by institutions rather than individual investors, but you may still be interested in who is making recommendations for your portfolio within a firm. The combination of education, experience and success record will determine how qualified a particular analyst is and a designation as a CFA is seen as a key certification for financial analysts.

Accountant

Accountants keep track of money. Most have a specialty: Public accountants work for public accounting companies and do accounting, auditing, tax and consulting work. Management accountants keep track of the money earned and spent by the companies they are employed with. Government accountants ensure sure that government accounting records are correct and review the records of people doing business with the government. You can also find individual accountants to help you with your money records and taxes.

Credentials: A Bachelors degree in accounting is usually the minimum education requirement. Masters degrees in accounting or business with a concentration in accounting are also available. Any accountant that files a report with the Securities and Exchange Commission must be credentialed as a Certified Public Accountant. Obtaining certification as a CPA requires (in 46 states) completion of an extra 30 hours of related undergraduate college coursework.

Skills:

• Knowledge of finance, accounting, budgeting and cost control principles
• Proficiency with financial and accounting software
• Extensive knowledge of federal and state financial regulations
• Ability to analyze financial data and communicate effectively through financial reports, statements and projections

What to Look For: It is not necessary for an accountant to be certified, so any additional professional designation is demonstrative of advanced knowledge in their field. A CPA is probably the most well-known designation, yet many other special certifications may be obtained by accountants depending upon their particular focus. One such example is the Certified Management Accountant title conferred by The Institute of Management Accountants.

Stockbroker

Stockbrokers work privately or for stock brokerage houses. They seek out and assist retail clients, including both corporations and individuals, in determining the best investments based on their interpretation of financial data provided by analysts. They then facilitate the transaction on the client’s behalf. Additionally, stockbrokers develop investment plans for clients, maintain records, monitor transactions and review financial reports.

Credentials: While a college degree is not necessarily required, most stockbrokers have one. Many also pursue MBAs, especially for high-level positions. It is required that they are licensed by passing the General Securities Registered Representative Examination, also known as the Series 7. Many states require stockbrokers to pass the Uniform Securities Agents State Law Examination as well.

Skills:

• Excellent interpersonal and communication skills
• Ability to identify market trends and how they affect investments like stocks or bonds
• Comprehensive understanding of financial health of investments, balance sheets, P/E ratios, etc.
• Recognition skills of unique investment opportunities

What to Look For: Personal qualities and skills are often considered to be even more important than academic training. The track record of the stockbroker is also important. Since they are often entrusted with large sums of money and sensitive information, it is especially important that you trust your stockbroker. Like a financial advisor, you need to determine whether their motivations are dictated by their commission structure or helping you build wealth.

Insurance Agent

Insurance agents are generally the first point of contact between an individual, family or business and an insurance company. They specialize in one or several types of insurance, including life insurance, health insurance and property or home insurance. Insurance agents search for new clients and assist them in selecting an insurance policy. Captive agents work on the behalf of a single company while insurance brokers match the best policy with their client among several insurance companies they represent.

Credentials: The most important aspect of being an insurance agent is sales. Some insurance agents only have a high school education with a proven ability in sales while others obtain a college degree in business, economics or finance. A few schools offer specific Bachelors degrees in the field of insurance. Insurance agents learn most of their skills by shadowing other agents, however. Additionally, most states mandate licensure and ongoing education every two years.

Skills:

• Sales expertise
• Specialized knowledge of particular insurance type
• Aptitude for explaining highly technical concepts
• Ability and desire to stay up-to-date on constantly changing industry and coverage policies

What to Look For: All agents are required to be licensed to sell insurance in whatever state(s) they work. Separate licenses are needed for every type of insurance policy being sold. Most states require that an agent complete coursework and pass an examination before receiving a license. Be sure that any insurance agent you work with holds a license in their particular field, whether it be life, health, auto, property insurance, etc. Agents may also receive additional certification or professional designations by organizations such as The National Alliance for Insurance Education and Research.

You can cut down on a lot of confusion and wasted time by going straight to the professional who meets your financial needs. By above guide to match the appropriate person with what you’re looking for, you should have a good start in finding a qualified industry professional.

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