Investment Analyst

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21 Aug, 2024

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An investment analyst is a person who presents his investment advice (buy, sell, hold) to their clients or portfolio managers after conducting a thorough financial analysis, preparing financial models, and correlating the impact of economic conditions on the related.

The skills and qualifications required to hold the position of an investment analyst are many. However, it is the inbuilt flare to analyze financial figures that make individuals fit into the role. Their ability to assess positions is what helps investors and traders understand the potential of an investment.

Investment Analyst Meaning

An investment analyst refers to someone providing investment advice (buy, sell, hold) to their clients or portfolio managers after performing a complete financial analysis, preparing financial models, and comparing the related economic conditions' influences.
It concentrates on determining financial and economic information concerning a given company and creating recommendations on buying, selling, or holding.
The top-down and bottom-up approaches are the responsibilities of the investment analyst.
A bachelor's degree, master's degree, and professional qualifications are required to become an investment analyst.

Investment Analyst Explained

Investment analyst jobs are good for individuals looking to build a career in the financial industry, especially in the investment sector. 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. The work of an investment analyst depends on the type of employer. For example, investment management firms hire them to help their fund managers make specific investment decisions. In contrast, brokers and investment banks appoint analysts to advise their clients or portfolio managers.

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 funds and advisory firms appoint buy-side 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.

Though the average salary of investment analysts is $95, 574, it still varies based on a candidate’s education, certifications, skill sets, and other factors.

How To Become?

There is a series of steps that individuals require following to kickstart their career as investment analysts. Based on what they expect from their career, the individuals can decide how to proceed. The career paths of investment analysts are:

#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.

Qualification

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. The analysts provide data and information generated, which requires a high level of communication skills.

Job Description

#1 - Top-Down Approach

Concentrate on economic events and conditions and their impact on investment. For example, bank rates, unemployment rates, inflation rates, 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 account, balance sheet, and cash flow statement.
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 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.

Financial Analyst vs Investment Analyst

Criteria	Financial Analyst	Investment Analyst
Definition	Financial analyst generates reports to help the business make the necessary decision by analyzing financial data provided by the firm.	This research is to create economic models, deliver results and recommendations to clients, and manage specific investments in securities.
Fields	A financial analyst is a wider term, which means many companies require financial analysts to understand their client finance, company finance, updating financial data in the system, etc.	Investment analysts in niche terms are compared to financial analysts since it focuses on various financial aspects and research related to available investment categories and presents their recommendations.
Work	Analyzing quantitative data generated by the system, cost-benefit analysis, financial data from various subsidiaries/ branches, and business forecasting.	Analyzing economic data, understanding the financials of a given investment, meeting with managers, and presenting data.

Frequently Asked Questions (FAQs)

Is investment analysis a promising career?

Investment analyst is a well-paying job consisting various advantages. To work in finance, one must possess analytical thinking, research, and mathematical capability. Moreover, they advise investment methods to assist clients in raising capital.

What do investment banking analysts do?

Investment banking analysts research and analyze financial information and market trends. Moreover, they use economic models to analyze deals and estimate profitability. In addition, they manage merger-and-acquisition and administer IPOs and private-equity settlements.

What is a capital investment analysis?

Capital investment analysis, or capital budgeting, evaluates and analyzes potential investments in long-term assets or projects. It aims to make informed decisions about allocating financial resources to projects or investments.

Does investment analysis focus on cash flow?

Yes, investment analysis focuses on cash flow as one of the critical considerations. Hence, here is how cash flow is essential in investment analysis. It helps in cash flow generation, cash flow timing, cash flow patterns, cash flow sensitivity, and cash flow as a funding source.