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Why Learning All About Financial Analysis Would Still Not Make You A Better Investor

Many investing books will teach you how to read a financial statement and how to perform complex financial analysis to determine the value of a company.

These are all essential in becoming a good investor. But you might be disappointed to know that even if you know all there is to know about financial analysis, it will not make you a better investor.  If investing consists solely of pulling out numbers and performing numerical analysis, then a computer will be the best investor in the world. But it’s not. The simple fact remains that there is a human element in investing and that human element is actually the most important ingredient in investing.

Thus, besides learning about financial analysis, we also need to learn how to control our emotions. Also, there’s a real need to expand our knowledge beyond the narrow scope of finance – this is akin to the acquisition of what investing maestro Charlie Munger calls “worldly wisdom.”

This is why most great investors read books that touch upon a very broad base of knowledge. They learn from, amongst others, business books, economics books, biology books and maybe most importantly, history books. All serve the grand purpose of allowing an investor to view things from different angles and understand everyone’s point of view and where his/her personal shortfalls might be.

Foolish Summary

The main takeaway here is that a great investor never stops learning. To be one, we have to stay humble and believe that there is always something for us to learn.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.