As an investor it would be pretty daft to plunge full-steam-ahead into an investment without first knowing all they can about the security (thing they’re investing in), the industry and, critically, the level of risk involved. Investment research and analysis is therefore an indispensable part of the process.
How does investment research & analysis work in finance?
Of course, the majority of investors don’t carry out this research themselves! Instead, investment banks and specialist investment companies supply whole armies of research and analysis experts in the form of whole departments to provide this service on their behalf. Investors simply utilise the information and analysis gathered for them to guide them in their decisions.
Associates and analysts research into economic conditions and create financial models and reports for all sorts of different markets, industries, companies and any type of investment opportunity you can think of.
As the number of things individuals and companies are able to invest in are so vast, analysts are likely to develop a particular area or sector of expertise as they clock up their experience. In investment banking research forms part of the front office – so it’s right at the heart of generating capital and isn’t hidden away in any shape or form!
Areas of research…
Typical research focuses are areas like fixed income research or equity research. Fixed income research involves lots of in-depth research into the debts market, such as bonds and derivatives; equity research will involve much more work on companies. With so many investment opportunities out there, big teams often split up the load so that analysts will have their own portfolios of companies to be the go-to expert on.
Keeping on top of the latest news…
Keeping on top of movements in the market and understanding the reasons for these changes is really important. Associates and analysts will usually kick-start their days with a healthy dose of catching up on any developments – and we’re talking an early start of 6am or 7am – when companies start to reveal their latest information.
They’ll spend time building financial models to aid them with analysis and packaging up their findings into easy-to-understand reports. They need to be able to communicate this knowledge in an effective way so that investors understand completely and can decide where to place their money!
A graduate entry role is generally the way into this business. You’ll need to have a relevant degree in most cases, usually a finance or numerical subject, and a minimum of a 2:1. Investment banks look for the crème-de-la-crème, so you’ll have to be sharp with your commercial awareness from the start!
Role reversal…kind of…
Something to note: if you take a look at some of the other industries in finance, you’ll notice that a lot of the more junior lot in teams are known as analysts. In research it tends to be reversed: an analyst is a more senior member of the squad.
For years I have studied American finance regulations. All the information in this blog is sourced from official or contrasted sources from reliable sites.
Salesforce Certified SALES & SERVICE Cloud Consultant in February 2020, Salesforce Certified Administrator (ADM-201), and Master degree in “Business Analytics & Big Data Strategy” with more than 13 years of experience in IT consulting.