Encouraging New Investors to Uncover the Truth

This summer Wharton Global Youth Program decided to invite students in our on-campus and online programs to share their memorable moments with us. We will be publishing their first-person essays in our business journal and newsroom throughout the year. 

This, our first published student essay from summer 2024, is written by Lingshan L., a true ‘Wharton Global Youth’ who last year served as a team leader in the Wharton Global High School Investment Competition, inspiring her to attend Essentials of Finance on the Wharton School’s Philadelphia campus this summer. Lingshan, who is 16 and founder of the investment club at Jumeirah English Speaking School in Dubai, UAE, was also a strong voice in Wharton Global Youth’s latest Comment and Win competition from June through August.

All these experiences culminated in this first-person essay, in which she shares insights for young investors from her summer studying finance – an appropriate theme as teachers and student teams register for the 2024-2025 Wharton investment competition by September 13.  While Essentials of Finance covers a broad range of concepts, her focus on investing principles is a nod to her investment competition peers, past and present. Says Lingshan: “I want to use the knowledge I’ve learned at Wharton to help and inspire more people in finance.”

Have you ever thought about the truthfulness of the 74 gigabytes of data that is processed by your brain each day? In a world where information is disseminated at an unprecedented speed, the distinction between truth and falsehood becomes increasingly blurred. From social media to financial news reports, the content we consume can be filtered, curated, or even manipulated, calling into question its reliability. Nowadays, are we truly seeing and hearing reality, or are we absorbing a narrative designed to influence our beliefs and actions?

In July 2024, I met Dr. Wayne Williams, the program leader of Wharton Global Youth’s Essentials of Finance. During my two weeks learning finance, we discussed the complexities and opacity that often exist in modern society and, more importantly, inside businesses. He emphasized how understanding these dynamics is crucial for making informed decisions in a landscape where data can be both a tool for insight and a mechanism for confusion.

“What you see might not be real – social media or even the news. As an investor you need to have your own thoughts, knowledge and a keen insight to determine the true layer hiding beneath things — what’s real and fake,” said Professor Williams.

With this in mind, my Essentials of Finance project team of five students decided to consider information and data from several reliable websites to prevent biases and misleading information. As our final project, we researched Exxon Mobil Corp. and gave some advice to investors about the company’s operations.

I learned a lot about how to evaluate a business and the power of teamwork during my two weeks at Wharton. Here are some key takeaways:

💸 Teamwork. Valuing a business and working as an advisor is never a job that can be done by one person only. No one can be excellent at everything they do. We learned, discussed, and worked closely together to split the task between the five of us. This allowed us to pool our diverse expertise and perspectives, leading to a more thorough analysis. Moreover, it fosters an environment of sharing knowledge, where we learn from each other and build on those strengths.

💸 Research. Professor Williams stressed the importance of frequent and constant research as an investor. The world of finance is constantly changing every second, which can be influenced by various factors such as economic trends, geopolitical events, and shifts in consumer behaviors. “Only if you do research, you’ll have a wise insight into the business and its market, enabling a more proactive and adaptive investment strategy,” said Professor Williams.

💸 The Business. “You don’t invest in a stock, you invest in the business,” he stressed. It’s essential to understand how a business operates and where its profit comes from. “Costco doesn’t make their revenue from selling goods, they rely on selling their memberships,” he gave as an example.

💸 The Bottom Line. Accounting, considered the language of business, is the key fundamental for making an investment. Understanding what a company’s ‘big’ numbers represent is crucial. The bottom line, the final total on a balance sheet, isn’t just a number on a spreadsheet; it’s the pulse of a company’s true vitality. “Accounting is working with the past, while finance is looking at the future; both are indispensable,” Dr. Williams said.

💸 Models, Markets and More. Making an investment is never a one-step process. It requires a collection of accurate data, information, and your own analysis from a range of sources. “Understanding a company’s business model and its current position in the business cycle is the first step you should consider,” he said. My team and I further developed our dividend discount model (DDM) and discounted cash flow (DCF), valuation methods we compared with the market value to better understand the value of the business and help us make a more informed investment decision.

During my two weeks at Wharton, I considered myself an investor. I learned about all the detailed and complex valuation processes needed to make informed investments – and I grew to appreciate finding truth through careful and multi-layered research. I now have a significantly better understanding of the financial world, and I’m inspired to explore this field more deeply!