Stock Analysts are one of those High paid, overrated jobs that every individual who wants to earn a lot of money, is always interested in. In this article on how to become a stock analyst, I’ll explain the following
- Eligibility required for a Stock Analyst.
- Important Qualities of a Stock Analyst.
- Job Profile of a Stock Analyst.
- Salary of a Stock Analyst.
- Licencing and Certification for Stock Analysis.
As stock markets are on a boom, more and more people tend to invest in the capital market. A Stockbroker does his research analysis and recommends the best stocks to invest. Such stockbrokers are also termed as Stock Analysts or Financial Analysts or Research Analysts.
How to become a Stock Analyst?
Stock analysts (often referred to as equity analysts) work in both buy-side and sell-side firms producing research reports, projections, and recommendations about stocks and companies. If you have a love for learning, if you are well versed in data analysis and if you are a skilled problem solver, then you will thrive on this career path.
No licensing board or regulatory authority set hard-and-fast educational minimums for Stock analysts or Financial analysts. However, a bachelor’s degree has become a de facto minimum for receiving an offer to work in either field. Beyond this, the individual firms doing the hiring set the standards.
The eligibility to enter this field is an MBA. Although you are also eligible for this field if you are equipped with a bachelor’s/master’s degree and experience in the financial service industry or statistical research. Trainee positions are available to candidate’s with bachelor’s degree in Business Administration, Finance and Economics. Although there is no mandated training programme for analysts, it is often appreciated if the stock (equity) analyst has an MBA.
If you have an expertise in the field of Engineering or Medical or Pharmaceuticals along with specialized skills in Finance, Economics, Statistics etc. it will give your analyst career an upper edge as you will have a better understanding of those fields and you will be able to take a better decision while investing in those sectors/areas.
Important Qualities for a Stock Analyst
- Stock analysts or equity analysts need strong analytical and quantitative skills, problem-solving ability and, equally importantly, a love for the markets. Just as a financial advisor or stockbroker keeps a finger constantly on the pulse of the market, analysts who study investment data must do the same to draw accurate conclusions from the data.
- The job of the stock or equity analyst is such that they are required to explain their findings and recommendation to others and thus, should have excellent presentation skills, self-confidence, maturity as well as the ability to work alone.
- An analyst should also possess the skill like a strong attention to detail, a drive for research, an understanding of tax laws, money markets and economy in general. In addition to this, people skills and salesmanship are also very important skills for stock (equity) analyst.
- The candidate should be familiar with warning signs of poor future performance and other abnormalities in a company’s statement of earnings. An understanding of fundamental accounting principles is also required, as well as an understanding of macroeconomic and microeconomic functions.
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What is the Job Profile of a Stock analyst?
Financial analysts typically do the following:
- Recommend individual investments and collections of investments, which are known as portfolios
- Evaluate current and historical financial data
- Study economic and business trends
- Examine a company’s financial statements to determine its value
- Meet with company officials to gain better insight into the company’s prospects
- Assess the strength of the management team
- Prepare written reports
Stock analysts evaluate investment opportunities. They work in banks, pension funds, mutual funds, stock-broking firms, insurance companies, and other businesses. Stock analysts are also called securities analysts and investment analysts. Stock analysts can be divided into two categories: buy-side analysts and sell-side analysts.
Buy-side analysts work for fund managers at mutual fund brokers or financial firms. They do research on companies in their employers’ portfolio and other potential company investment opportunities. Buy-side analysts generally have broader responsibilities, such as doing research on larger industry topics like technology.
Sell-side analysts work for large investment banks. They do more narrowly focused research on a list of companies, often in the same industry, and provide reports to the firm’s clients. They build models projecting the firm’s financial results and interview customers, suppliers, competitors, and other sources with firm and industry knowledge.
They provide a research report with financial estimates, a price target, and a recommendation about the stock’s expected performance. While buy-side analysts often conduct research on larger industries (e.g., technology), a sell-side analyst will do more focused research within an industry (e.g., software).
Author’s Suggestion for Success:
Salary of Stock (equity) Analysts
The average annual salary for an equity research job is $97,000, according to investopedia.com. A majority of the positions in equity research pay less than that, though, with the lower end of the range at $65,000. The high end of the range is around $158,000.
The median annual wages for Stock analysts in the top industries in which they work are as follows:
|Securities, commodity contracts, and other financial investments and related activities||$97,000|
|Professional, scientific, and technical services||$83,620|
|Management of companies and enterprises||$80,380|
|Credit intermediation and related activities||$77,250|
|Insurance carriers and related activities||$74,640|
Fund managers are typically compensated by fees, usually structured as a percentage of assets under management and a percentage of the fund’s annual return.
Most Stock (equity) analysts work full time, and about 3 in 10 work more than 40 hours per week. Much of their research must be done after office hours because their days are filled with telephone calls and meetings.
Licenses, Certifications, and Registrations for Stock Analysts
In the United States
The Financial Industry Regulatory Authority (FINRA) is the main licensing organization for the securities industry in the USA. It requires licenses for many Stock analyst positions. Most of the licenses require sponsorship by an employer, so companies do not expect individuals to have these licenses before starting a job.
An example is the Accredited Financial Analyst (AFA) certification from the AAFM USA, which Stock (equity) analysts can get if they have a bachelor’s degree, and pass two exams.
In India, there is no such Licensing Requirement as on Date but Certification is often recommended by employers and can improve the chances for advancement. Therefore, if you get yourself registered as a Research Analyst under Securities Exchange Board of India (SEBI), you can easily pursue your Stock Analyst career.
In terms of the Regulation 3(1), a stock analyst has to obtain a certificate of registration from SEBI as a research analyst. Independent research analyst or research entity (intermediary) who is engaged in the issuance of the research report or research analysis is required to make an application for registration under RA Regulations.
Further details visit the following links:
- (FAQs) on SEBI(Research Analysts) Regulations, 2014
- How to get registered as Research Analyst and Instructions for filling in Form A
I would like to give my readers a caution about these job sector. Though the profitability is way above any other professional career in the finance field there are certain risks in such careers as well.
The job prospects of security analysts are tied to the stock market, with bull markets leading to increase in hiring and bear markets causing layoffs. So, be patient if you are a victim if a bearish market and if you want to avoid that try to start your own consultancy in this field.