What is an Investment Analyst?

Explanation

The work of an investment analyst depends on the type of employer. E.g. investment management firms hire them to help their fund managers make specific investment decisions. In contrast, brokers and investment banksInvestment BanksInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more appoint analysts to advise their clients or portfolio managers Portfolio ManagersA portfolio manager is a financial market expert who strategically designs investment portfolios.read more.

It focuses on evaluating financial and economic information related to a given company and generating recommendations on whether to buy, sell or hold.

  • Buy-Side: Mutual fundsMutual FundsA mutual fund is a professionally managed investment product in which a pool of money from a group of investors is invested across assets such as equities, bonds, etcread more and advisory firms appoint buy-sideBuy-sideThe term “buy-side” refers to entities that advise their clients like individual investors and institutional buyers on investments and securities purchases. Private equity firms, mutual fund companies, life insurance companies, unit trusts, hedge fund companies, and pension fund entities are examples of buy-side firms.read more analysts to identify investment opportunities in the market. Sell-Side: Investment banks and research firms appoint sell-side analysts to understand investment risk and investment and generate reports on specific companies.

Responsibilities

#1 – Top-Down Approach

Concentrate on economic events and conditions and their impact on investment, e.g., bank rates, unemployment rate, inflation rate, industry-wise performance, and company financial data.

#2 – Bottom-Up Approach

Concentrate on the process by creating research reports by company, sector industry, economic data, etc. In this approach, priority is focused on the company’s financials and then approaching other factors affecting its business.

  • Research on Company: Research regarding its industry performance, significance, and status.Analyzing: Present analysis of company financials like profit and loss accountProfit And Loss AccountThe Profit & Loss account, also known as the Income statement, is a financial statement that summarizes an organization’s revenue and costs incurred during the financial period and is indicative of the company’s financial performance by showing whether the company made a profit or incurred losses during that period.read more, balance sheetBalance SheetA balance sheet is one of the financial statements of a company that presents the shareholders’ equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner’s capital equals the total assets of the company.read more, and cash flow statementCash Flow StatementA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a business.read more.Generating Reports: After analyzing financial data and summarizing the company’s financial condition, growth approach, and value.Updating Knowledge: Meeting with company management, fund managers, and brokers to understand their views and business approach in the market.Industry/Sector and Economic Analysis: analyzing economic factors Economic FactorsEconomic factors are external, environmental factors that influence business performance, such as interest rates, inflation, unemployment, and economic growth, among others.read more affecting the company’s operations and overall business.Recommendation: After generating and analyzing the company’s financials, management approach, and prospects, create recommendations based on reports.Update Knowledge: Continuously updating information is the important responsibility of an investment analyst, which never ends.

Qualification

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  • Bachelor’s Degree: Important for entry-level jobs with business-related subjects like finance, commerce, and economics with additional skills like quantitative analysis statistics.Master’s Degree: Many companies prefer master’s degree candidates in business management and finance to advance in this profile.Professional Qualifications: It takes several years to qualify and gain experience from institutes like the Chartered Institute of Securities and Investments CFA Institute, but they provide enough knowledge and expertise to enter an advanced level analyst.

Skills

  • Understanding of Financials and Economics: The most important skill set is understanding the company’s financials and economics since these two components decide the business approach and future in the market.Analytical: It must be analytical and can create and analyze the given data.Updated Knowledge: The analyst position continuously requires updates on current affairs, bank rates, corporate actions, government announcements, tax policies, company management, etc.Basic IT Skills: Although an analyst does not require an IT background, some skills will help investment analysts generate reports and efficiently work under work pressure. E.g. Excel, VBA, SQL, etc.Team Efforts: An analyst position is not a single-person job but requires a team, which generates data, updates information in systems, analyzes, and provides reports. An analyst needs to work and sync with the team to become more efficient.Communications: They might have to attend meetings with the company’s management, brokers, and traders and provide data and information generated, which requires a high level of communication skills.

Career Path of the Investment Analyst

#1 – Entry-Level

Graduates with relevant subjects start entry-level positions as junior analysts. The function of junior analysts is to collect and update data in the system to generate financial reports.

  • While working as a junior analyst, individuals can learn various techniques to acquire a skill set. At the same time, they can approach a master’s degree for advancement in this field.An individual with a master’s degree may get an offer for the senior analyst role if he possesses skills and knowledge.Senior analyst focuses on different categories of securities while planning, conducting new projects, developing and updating data, meeting company management, and presenting reports to clients. In addition, senior analysts observe and understand, and junior process analysts work under them.

#2 – Portfolio Managers

Over time, if the senior analyst performed with high accuracy and standards, he might be offered the portfolio manager position. The function of the portfolio manager is to set strategies for various investments.

Financial Analyst vs Investment Analyst

Conclusion

Job profiles and career prospects for investment analysts are good for individuals looking to build a career in the financial industry, especially in investment. Job profile needs an individual ready to work under pressure, work hard while coordinating with the team, and might demand to work on holidays if work arrives even with these levels of duties. A pressure analyst profile provides a high level of job satisfaction and career growth. In addition, many large firms like investment banks, financial institutions, insurance firms, and brokers need analysts in daily operations. Individuals with the given skill set and level of qualification can reach a profile to portfolio managers.

This article is a guide to the Investment Analyst definition. We discuss the responsibilities of investment analysts and skills with qualifications and career paths. You can learn more about it from the following articles: –

  • Investment SecuritiesCareer Path in Corporate FinanceCareers in Equity ResearchInvestment Banking vs Corporate Banking