How to Become an Investment Analyst

If you can envision yourself providing recommendations for clients or your employer, in an investment firm, hedge fund, insurance company, or bank setting, then you are on your way to becoming an investment analyst. You will need to combine certain skills, talents and education, along with practical experience via an internship or an entry level position. 

Develop Your Research and Analysis Skills

In order to become an investment analyst, you must learn how to take a financial topic and investigate or research the topic by formulating hypotheses and identifying relevant questions. You could gather data about the topic by designing experiments or studies, by selecting appropriate methodologies, techniques, and tools for data collection and analysis. Data collection can also be accomplished through surveys, interviews, and learning from definitive prior studies. Once you have determined how you will research and have collected your data, it must then be analyzed and conclusions should be drawn. 

As the title implies, you will need to learn how to analyze financial information in statements, trends in the applicable economy, and various market data sets, for the purposes of identifying investment opportunities. 

Learn About Risk Assessment

Since investment analysts are responsible for advising their clients with regards to how to invest their monies, it is important that you learn how to look at the plethora of investment opportunities and assign the risk factor of each. 

1. Identify Risks

Most investments involve some level of risk. For example, the stock market can be volatile, bonds can be defaulted on, liquidity risks (not being able to sell an asset in a timely manner), currency fluctuations, adhering to compliance regulations, and identifying and interpreting the present and future dynamic of the geopolitical climate. 

2. Quantify the Risks

Learn how to take the data you gleaned from your research modalities and apply investment analysis tools in order to mathematically and logically measure the risks. This can be achieved by conducting an historical analysis by specifying patterns and trends in past market performance, the range of price movements under what conditions. Tools used to quantify investment risks using mathematical formulas and algorithms are statistical modeling (which includes mean-variance analysis, Monte Carlo simulation, value at risk (VaR), conditional value at risk (CVaR), and stochastic modeling), sensitivity analysis (the study of interest rates, inflation and exchange rates, asset valuation), scenario analysis, correlation and covariance analysis, and risk measurement via established formulas (i.e. the Sharpe Ratio). 

Master the Art of Recommendations by Becoming Adept in Client Relations

As an investment analyst, you will need to develop your communication and “people skills.” You will not only do work behind the scenes (research, development of probability constructs, risk assessment studies and conclusions), you will also be able to present your findings to your client and/or employer. There is an abundance of free workshops, seminars, tutorials, and training videos on the internet. Fortify your marketability by developing skills used in sales, marketing, and presentation.

Find Out About Applicable State and Federal Regulations 

You will need to become very familiar with the following,

1. Securities Laws
2. Regulatory Agencies (i.e. SEC, FINRA)
3. Insider Trading Regulations
4. Code of Ethics and Standards of Conduct (everything you need to know and obtain can be found at the CFA Institute https://www.cfainstitute.org/ )
5. Anti-Mondy Laundering Laws
6. “Know Your Customer” (KYC) Mandates and Requirements
7. Privacy and Global Regulations

Education Requirements For Investment Analysts

If you have not yet earned a bachelor’s degree, begin right away to find a college to meet your needs. Make sure to research the institutions thoroughly to ascertain their reputations in the financial sector and the collegiate community. Ask whether they are accredited, and read reviews as to their suitability for your goals. The ideal undergraduate degrees include finance, accounting, economics, mathematics, or business administration. Online programs are available from some of the most respected colleges and universities, and of course, there are traditional on-campus options. If you cannot financially afford to attend a four-year program initially, consider attending a junior or community college to satisfy your general education requirements. One important thing to remember—make sure your credits from the junior or community college will transfer to the 4-year college you are interested in eventually attending. 

Secure an Internship  as an Investment Analyst

You can secure an internship by speaking with the department personnel (in your major) at your college or university, by looking at different trade and professional organizations (they advertise internships), or by seeking out recruiting companies.

In a recent interview, the Employees Retirement System of Texas (ERS) outlined exactly what their investment analyst interns would be tasked with doing. They delineated, 

1. Provide written or oral recommendations, analysis, and research to ERS investment staff
2. Complete an agreed-upon research project to present at the end of the 8-week program
3. Collaborate on additional ad-hoc projects to enhance the goals of the ERS investment program
4. Evaluate the potential impact of current macroeconomic events on ERS investment strategy
5. Monitor market, industry, and asset class trends
6. Collaborate with members of various ERS teams to optimize Trust performance and goals
7. Attend prospective and current investment manager meetings
8. Diligence prospective investments, including quantitative and qualitative analysis
9. Assist investment staff as needed

It is obvious that finding and acquiring an internship will greatly prepare you for the job of investment analyst.

Job Outlook For Investment Analysts

According to the U.S. Bureau of Labor Statistics (https://www.bls.gov/), Investment Analysts have noteworthy opportunities for the time period spanning 2022-2032. The field is growing by 8% per year, which is slightly faster than the 6% average growth rate. Government experts predict that each year over 27,400 openings will become available (between 2022-2032), due to replacing workers who leave the profession, leave the work force and/or retire. Over the ten-year time span (2022-2032) it is projected that a total of 29,000 new positions will be created. In 2022 there were 376,100 individuals working as investment analysts. The median pay per year was $96,220, while the median hourly wage was $46,26. (As a reminder, the “median” amount is not an average, it is the middle value of a dataset. For the U.S. BLS definition go to: https://www.bls.gov/cps/definitions.htm#medianearnings) .

By pursuing your education, participating in an internship (or having experience from an entry-level job), becoming certified in accordance with state and federal regulations, maintaining any necessary continuing education requirements, and networking with others in the field, you will be on your way to a lucrative and rewarding career as an investment analyst.