With more than half of U.S. adults owning stocks and an increasingly globalized investment world, the opportunities for lucrative, rewarding and impactful careers in stock market-related fields have never been more numerous or varied.
From trading or compliance to marketing or sales, Wall Street and the firms that make the market a reality have positions that dovetail with many academic majors. And the jobs aren’t all in New York City’s Lower Manhattan, with employment available in most major urban areas around the world.
Kelly Ko, a Cal State Fullerton Mihaylo College finance lecturer and 31-year investment management veteran, takes a look at the options available for stock market careers and what it takes to get started.
What are the career paths available today?
The most commonly thought of path is that of a securities analyst or fund manager, particularly when it comes to institutional asset management. But there are also a variety of other positions in the industry that make up the infrastructure of a really good asset management firm.
The type of education needed is a strong background in finance, specifically investment finance. It also requires potentially a professional designation, such as the chartered financial analyst (CFA) and/or postgraduate degree (MBA), if you wish to eventually get to a position with decision-making responsibilities over assets under management.
The day in the life of a typical securities analyst or fund manager is extremely busy. You have to be very good at managing time and information, as well as using the resources to best add value to the firm’s clients (portfolio performance) in addition to managing clients’ relationships. There is the research aspect of managing a large universe of stocks and best being able to identify the most attractive investments.
If you are a fundamental analyst, that means conducting stock research, which most certainly involves understanding an industry and companies, building financial models and forecasts, valuing the companies, visiting management and peer companies, speaking with industry analysts, and so forth. There is also the business aspect of growing firm assets through consultants (for institutional clients) which was the equity asset management field I worked in.
There are many jobs in the industry that are not investment decision-making oriented. Client service, marketing, sales, trading, back office and compliance are just a few. They take different skill sets than someone on the investment side of the business. Often, people getting into the industry may start in one of these areas and eventually move into a different one. Usually, if you’re seeking an investment-related position, those start with internships and then as a research assistant position for an analyst. To best position yourself, you should keep as wide a net of skills as possible and an open mind to working in a position that may eventually lead to what you really want to do, even if your job isn’t what you want to do at the present time. That might mean working in some other role rather than investments at an asset management firm until such a position opens up.
What are the skills that employers are looking for?
Time Management. To be a good investor, you have to look at more than just one or two companies. You have to have a good sense of the playing field, which is a much larger universe than just a few companies, and to properly research any one company can be very time consuming. Thus, you have to be very good at deciding how much time you want to spend to assess whether it will be a good investment.
Critical Thinking and Decision Making Abilities. You’ll always have to make a decision to buy it or not with imperfect information. You also have to know when to kill the idea and move on to the next one. A portfolio of stocks takes many ideas, not just a few – and they have to come from lots of industries (diversification). And you constantly evaluate what you own versus the opportunity set of new ideas.
Thinking Outside of the Box. You also have to look beyond just the companies you hear about in the news, as those are likely to be the ones that are often the least attractive (since everyone knows about them).
A Good Reader. I think an aspiring professional looking to gain skills should do a lot of reading. Read some of the books written by great investors (Warren Buffet, Howard Marks and Benjamin Graham, to name a few). Also, read lots of information on the capital markets. Try to get a good sense of what fundamentally drives businesses and what makes a good investment.
Looking at popular culture, there is the belief that the system is rigged and that behaviors that border on insider trading are used by those in the know. Is the stock market a level playing field?
I don’t think the stock market is a level playing field. I think there is a disadvantage to the average investor who just doesn’t have access to information large institutional investors have, particularly if you are trying to invest in the stocks that are largely owned. It doesn’t [necessarily] have anything to do with insider trading or the market being rigged, but rather economies of scale and resources.
That said, there are plenty of stocks to invest in, so if you have a long time horizon and are willing to work to find good stock investments that are not necessarily what everyone’s focused on, you can make very good returns. This is why small capitalization stocks are more inefficient that larger ones, given there is less information on them and you pretty much have to do all of your own research on them versus accessing research done by others (such as Wall Street analysts and large institutional investors).
What is the biggest misconception that people have about working in the stock market?
That everyone is a stock trader who reacts to every bit of information shown on CNBC. That everything that is in print or on TV is something you should react to and invest in. Also, that anyone can be an investor. Investing actually takes a lot of work, discipline and skill to become good, and even if you are in the industry for a long time, you are constantly learning. From one time period to the next, it is never the same.
For More Information
The Mihaylo College Titan Capital Management program, which equips high-achieving finance students to manage real-world stock and bond investment portfolios, offers an applied introduction to the field.