Do You Want To Become A Financial Analyst?
Each day, top business enterprises the world over keep releasing or sharing various pieces of information. Other companies monitor these periodic releases of information. Thereafter, they determine whether to keep the companies (and the market) in the green. When it comes to monitoring the numbers and storing them, people rely quite heavily on computers.
Each day, top business enterprises the world over keep releasing or sharing various pieces of information. Other companies monitor these periodic releases of information. Thereafter, they determine whether to keep the companies (and the market) in the green. When it comes to monitoring the numbers and storing them, people rely quite heavily on computers.
However, some people still need to review the numbers for accuracy. Then, they need to make decisions based on their analysis. They might not make all the game-changing decisions. Yet, they do end up playing a significant role in the decision-making process. These people are financial analysts.
You may also be interested in Learning The Stock Market basics and assist you in making the right investments.
What is a Financial Analyst?
A financial analyst typically studies various macroeconomic and microeconomic conditions along with other company fundamentals. Based on the information gleaned, the financial analyst offers various recommendations.
For many people, the principal job of a financial analyst involves analyzing the overall current and forecasted strength of a company’s stock. Based on the results of the analysis, the financial analyst recommends a specific course of action to the client i.e. to buy or to sell the company’s stock.
The most common types of financial analysts include:
– Portfolio Managers: They supervise a team of analysts and select the mix of products, industries and regions for their company’s investment portfolio
– Fund Managers: These individuals deal exclusively with hedge or mutual funds
– Ratings Analysts: They assess the ability of various companies and governments to repay their debts
– Risk Analysts: They assess the levels of risk in various investment decisions and aim to limit potential losses
What Does a Financial Analyst Do?
Many financial analysts perform budget and cost analyses. Some financial analysts even help assess an organization’s abilities to repay the debts taken. Several analysts specialize in specific sectors or industries. However, financial analysts will typically fall into two categories. These include:
– The “Buying” Professionals: These financial analysts work for institutional investors (or organizations that have the capital to invest). These investors usually hire financial analysts for developing (or fine-tuning) their investment strategies. Such analysts will research stocks for in-house firms or track the stocks in a fund’s portfolio to assess whether they need to sell the fund’s position in a particular stock. Institutional investors could include funds, insurance companies, colleges, universities etc.
– The “Selling” Professionals: These financial analysts work for investment banks and securities firms. They help these companies price their products and sell them. These analysts typically compare and evaluate the quality of securities in a specific sector or industry. Thereafter, they compile reports recommending their clients to buy, sell or hold their investments.
Analysts in investment banks also help in determining the feasibility of certain deals, based on the fundamentals of the entities involved. This analysis could include IPOs or mergers and acquisitions.
What is the Educational Background of a Financial Analyst?
Undergraduate students, aspiring to become financial analysts, will need to take the relevant courses in math, economics, business and accounting. Some junior analysts even have backgrounds in majors like computer science, physics, biology and engineering. Companies usually hire MBA graduates as senior analysts as soon as they complete business school.
You could even become a financial analyst even if you’re not an MBA graduate of if you don’t have an economics major as an undergraduate. For this, you will need to study for the Series 7 and Series 63 exams. Alternatively, you could even consider enrolling in the Chartered Financial Analyst (CFA) Program. However, be mindful that you will need sponsorship before you can participate in these exams. You could obtain sponsorship from:
– A Self-Regulatory Organization (SRO) e.g. stock exchanges, the National Association of Securities Dealers in the United States, the Investment Dealers Association of Canada etc. or,
– A Financial Industry Regulatory Authority (FINRA) member firm
What Skills Do You Require for Becoming a Financial Analyst?
To become a financial analyst, you will need to:
– Possess a good understanding of the various management accounting concepts and know how to apply them to the business
– Have a solid understanding of the company’s products, markets and processes and be able to relate their analyses to the business
– Be proficient in using spreadsheets and databases for analyzing information
– Be able to collate and utilize disparate data for solving problems and turn data into coherent conclusions
– Go beyond merely completing reports by reviewing the reports and assessing what the reports say about the business (or focus more on the analysis than on the reporting)
– Possess a good understanding of the company’s financial systems – including having the ability to utilize these systems and informal people networks for obtaining the data or information required
– Possess good non-tangible skills such as flexibility, communication, influence, teamwork (collaboration), decision making etc.
The job of a financial analyst is one of the most common entry-level jobs in finance. However, it is also one of the most coveted jobs in the financial sector. Therefore, if you’re keen on the role, ensure that you acquire the right qualifications to land your dream job.
If finance is where you want to be involved with than check out this great informative post on Stock Market Trading For Beginners and get into investing your own capital and building your own profitable online portfolio.
