What Is Investment Banking?

Investment banking refers to a specific set of activities conducted by certain types of financial services companies and corporate divisions. These activities involve advisory-based financial transactions for governments, corporations, and individuals. These types of transactions take place in both domestic and international markets. While these activities may seem mundane to some, they are integral to financial transactions.

Investing

Investment banking is an industry that involves advising many different types of entities on a wide variety of financial matters. These companies can be large global firms or smaller boutiques concentrating on a specific sector. While most people will not have direct contact with investment banks, they are directly and indirectly involved in most aspects of our lives.

Investment banks employ a variety of strategies to raise capital for companies. These strategies may be used separately or in combination to get the best results.

Equity research

A career in equity research in investment banking involves gathering data on stocks and making recommendations to clients. These analysts produce reports that are generally between three and six pages long, and their work is focused on companies’ prospects and current performance. In addition, they conduct primary and secondary research. They may also make buy-hold-sell recommendations.

Entry-level investment bankers typically start as associates, but there are many ways to advance to a senior role. The compensation for research analysts is generally based on trading activity and the success of their recommendations. Depending on their experience level, payment is higher for investment bankers than equity research analysts.

Entry-level equity research jobs typically require a bachelor’s degree. Typical fields of study include accounting, economics, mathematics, physics, and biology. Although bachelor’s degrees are sufficient for entry into investment banking, it’s essential to have some post-graduate credentials in some areas. For example, in the oil and gas industry, investors often look for candidates with a mining or petroleum engineering background. In the healthcare sector, those with an experience in pharmacology and other related fields are highly sought after.

Sales and trading groups

Sales and trading are core functions of an Investment Banking firm. It involves buying and selling securities and financial instruments for institutional clients, including hedge funds, mutual funds, pension funds, and asset managers. These financial firms have distinct trading desks and divisions to serve different clients. These divisions are generally grouped by asset class and function.

Large banks primarily dominate this career path. However, there may be better fits for people who prefer working independently. Generally, sales & trading positions only involve managing part of the company, though you can be assigned to them. In terms of work, it follows the same hierarchy as Investment Banking, and you can expect to spend a few years working your way up.

Asset management

Asset management is a unique field that differs from investment banking. It focuses on providing investors with high returns while fulfilling a higher purpose. For example, some asset managers want to create a more socially responsible investment environment and ensure that ordinary people can earn a good investment return.

To enter this career, candidates must have a strong interest in investing. The industry is highly competitive, and firms are keen to see candidates take investing seriously. A few investment-related books can help cultivate this savvy. In addition to reading about investment theory, it is beneficial to join a local investment club and join a career club. These activities can boost your chances of getting a job in asset management.

The salaries are very competitive. Investment banking professionals get much higher wages than their asset management peers, but they also travel more and work more hours. In addition, they are responsible for bringing savers to borrowers. As a result, they also need to be more accountable.