How to Become an Equity Research Analyst
Information is by far the most valuable asset for any investor. Equity research, which is one of the leading activities in the financial market, is dedicated to researching information about the most diverse and dynamic asset class in the market.
Working as an equity research analyst requires multiple talents and skills and can contribute to a rewarding career. The responsibilities of an equity research analyst are basically to study assets, follow news, talk to market professionals and provide an appraisal of the stock to connect companies with investors willing to buy their shares. This means the routine of an equity research analyst is usually divided into three main activities: research, report and projections.
Both the sellers of investments options (such as investment banks and brokerage companies), and buyers of such investment options (such as mutual funds, hedge funds etc) employ research analysts. The sell side provide their research to their clients interested in making investments, whilst the buy side who manage their clients’ money and investments utilise these sell side reports to help them make the right decisions.
What Does an Equity Research Analyst Do in the Buy Side?
Mutual funds, hedge funds and others that manage their clients’ money and invest in their name, known as buyers, employ analysts to provide investment recommendations to assist their portfolio managers in constructing portfolios that gives good return on investment.
Therefore, an equity research analyst in the buy side does not sell recommendations but provide an internal support service for the company’s own traders and investors. Accordingly, the recommendations provided will be operated directly by the institution where equity operates.
What Does an Equity Research Analyst Do in the Sell Side?
Sell side equity research analysts are typically part of an investment bank or brokerage house and they focus on a universe of stocks within one or two industries in order to provide insightful investment ideas and recommendations to;
- The institutional investors
- Their salesforce and traders who in turn communicate these ideas to the investors
- The finance community through financial data service providers
Qualifications and Education to Become an Equity Research Analyst
- A bachelor’s degree in finance, business or accounting from a reputed university is required to work in equity research.
- A master’s degree is not required but it will be useful for climbing the career ladder.
- Persons trained in non-business areas are required to improve their technical knowledge through additional training (financial modelling courses) and/or certificates.
- Equity research analyst are expected to be well versed not only in finance, but also in corporate strategy, accounting and the latest regulations in the industry.
- There is no mandatory certification to become an equity research analyst but candidates with MBA’s, CA’s and engineers with CFA or other certifications are typically recruited.
What Does Research Analyst Job Descriptions Cover
Entry-Level: After completing bachelor’s degree in finance, business or accounting, most equity research analyst begin to work as research associates. A research associate job description is planning, organizing and conducting research on businesses, markets and investments. Research associates work under a senior equity research analyst. They move up to senior research associate position or research analyst position after at least two years.
After at least 2 years: The associates who have enough experience and performance for the next level, can be promoted to analyst position (or senior research associate position). Associates who have been promoted to analyst position spend less time on financial modelling and spend most of the time by writing reports and developing recommendations.
After several years: The associates can move up to the investment manager role after years of experience. The investment manager has knowledge about wide range of investment and financial products, including trusts, stocks, bonds, and shares. They research and read about economy, global finance markets, and general current event.