How to Become an Investment Analyst

Investment analysts (not to be confused with financial analysts) find and assess investment opportunities—stocks, bonds, and securities—for brokerages, fund managers, venture capital organizations, banks, and large financial firms. To do this, they conduct a lot of research and create complex financial models to produce detailed reports about investment decisions. On the surface it sounds dry, but the reality is anything but for those drawn to this profession. While a lot of your time will be spent crafting reports, you’ll also be building complex financial models, creating detailed investment strategies, participating in large-scale transactions, and learning a lot about finance along the way.

It’s not hard to become an investment analyst, but to succeed requires drive, perseverance, stamina, and a head for numbers. In this article, we’ll cover:

• What kind of work investment analysts do
• The difference between investment analysts and financial analysts
• The educational commitment to become an investment analyst
• Licensure and certification for becoming an investment analyst
• The typical advancement path for investment analysts
• What you should consider before becoming an investment analyst

What kind of work investment analysts do

Investment analysts’ goal to find money-making opportunities. They frequently work as part of a team responsible for reviewing and recommending investment products. Sometimes the team will also approve investments, report on the status of existing investments, and recommend portfolio changes.

In this role, you’ll spend a lot of time researching various funds, writing commentary, and delivering presentations about new investment opportunities or topics related to existing investments. You’ll also look at your client’s portfolio to determine whether the various holdings are performing as they should. Depending on where you work, you may be responsible for creating investment strategies or capital-raising strategies for individuals or businesses.

On a typical day, an investment analyst will:

• Create and update the bound 30- to 40-page pitch books that investment bankers present to corporate clients showing industry data, transaction and analysis data, and recommendations.
• Build financial models that include discounted cash flow analyses, leveraged-buyout models, mergers and acquisition models, comparable company or transaction analyses, and sensitivity analyses.
• Evaluate different investment alternatives that showcase the impact on earnings based on different allocation scenarios.
• Review and then double-check the work of other members of the investment team. Firms routinely move millions or even billions of dollars, so mistakes need to be caught before they can compromise deals.

The difference between investment analysts and financial analysts

‘Financial analyst’ describes a broad category of roles, of which ‘investment analyst’ is one. The term ‘financial analyst’ refers to specialists who look not only at investments, but also at valuation, budgeting, and forecasting. Most financial analysts do work that’s focused on one industry, region, or product. Investment analysts generally deal solely with investment opportunities and performance.

Educational commitment to become an investment analyst

To become an investment analyst, you’ll need to earn at least a bachelor’s degree. Most aspiring financial analysts earn bachelor’s degrees in:

• Finance
• Accounting
• Business administration

Some, however, major in:

• Mathematics
• Economics
• Computer science

Your goal as you work toward completing your undergraduate studies should be to build a strong foundation in math, finance, and macro- and micro-economics. You may also want to spend some time during your undergraduate years mastering relevant Microsoft Office products (e.g., Excel, PowerPoint, BI, and Access) and software like Factset.

A master’s degree is usually not required to advance to a senior analyst position, though there are exceptions. Three good master’s degree options for investment analysts are:

• Any MBA with a quantitative focus
• A Master of Science in Quantitative Financial Economics
• A Master of Science in Fnance.

Some of the best MBA programs for investment analysts can be found at:

• New York University‘s Stern School of Business, which offers an Investment Banking Immersion program
• Columbia University School of Business, which reports high starting salaries for graduates
• University of Virginia-Darden, which reports above-average placement rates
• University of Pennsylvania‘s Wharton School, which reports high placement and salary rates
• Cornell University‘s Johnson Graduate School of Management, which also has an Investment Banking Immersion program

Choosing schools can be tough, but you can narrow down your options significantly by looking for a master’s degree program with a lot of networking opportunities. Investment banking as an industry is largely about who you know, not what you know. Many people become investment analysts not by getting the right degrees, but by landing internships and spots in training programs at investment banks.

Licensure and certification for becoming an investment analyst

The licensing body for the investment industry is the Financial Industry Regulatory Authority (FINRA), but investment banking analysts only need to be licensed by FINRA if they plan to sell financial products. The good news is that even if you think selling packaged investment products might be a part of your career in the future, you don’t have to worry about getting your license now. That’s because employer sponsorship is required for licensure, so companies don’t expect lower-level employers to be licensed.

Many investment analysts hold investment and finance certifications. These certifications demonstrate dedication to the profession and also provide access to networks like the CFA Institute and local CFA Societies. Many opt for the CIMA (certified investment management analyst) and CAIA (chartered alternative investment analyst), but a quick look at job listings suggest that employers are most interested in candidates who have passed the three exams required to earn the CFA (chartered financial analyst) certification. You probably won’t need to be CFA-certified to get your first job, but chances are good your employer will expect you to earn it—especially if you want to advance to more senior positions.

Typical advancement path for investment analysts

Your career as an investment analyst can begin during your undergrad years if you start building your network and pursuing relevant internships. Big investment banking firms take undergraduate (and graduate-level) students into their summer analyst programs, where they receive valuable training and mentorship. Summer analyst programs aren’t take-the-coffee-order internships. Interns conduct research and update presentations and frequently do work that’s a lot more important and exciting.

In its summer analyst program advertisements, Bracebridge Capital includes a list of the types of duties its interns have handled in the past. Participants have:

• Analyzed drivers of performance of fixed income securities and constructed model cash flows for valuation under various scenarios
• Investigated structural features of asset-backed securities to determine relative value opportunities
• Developed programmatic tools in order to facilitate trading
• Analyzed loan-level data to forecast mortgage prepayments
• Used statistical analysis to build a “prediction of default” model for loans
• Engaged in a CMBS data analysis project involving a large proprietary SQL database to look for indicators of default on commercial real estate properties
• Attended a series of presentations given by senior members of the firm to broaden knowledge of all facets of our hedge fund business

Once you have your bachelor’s degree and have completed an internship, you’ll be qualified to work as a junior analyst. Your job will be to collect data, create spreadsheets, update databases, and do some analysis and modeling under the supervision of senior members of the department. College will have prepared you to do much of your junior-level work, but you’ll continue to learn the ropes in training programs sponsored by your employer. Most of these training sessions last several weeks and will allow you to dive more deeply into concepts and techniques investment analysts use every day. You’ll probably learn more about risk, financial statement analysis, modeling, and the markets in training than you did in your university programs.

After a few years in the workforce as a junior analyst, you may feel driven to head back to school to complete a master’s degree program. On the other hand, some investment analysts opt to go straight from a bachelor’s degree program into a master’s program. Take whichever path feels right or is the most feasible given your situation. With a graduate degree in hand, it’s possible to transition into a senior analyst role quickly or even to move immediately into a senior analyst position without having worked as a junior analyst first.

Senior analysts tend to specialize in categories of securities and may oversee the work of a small team of junior analysts. High-performing senior analysts may advance into portfolio manager roles—the terminal position for investment analysts.

What you should consider before becoming an investment analyst

This job is intense. Really intense. You’ll need to be incredibly detail-oriented, capable of meeting tight deadlines, comfortable working under immense pressure, and okay with ditching the whole idea of work-life balance. In a post on Investopedia, Andrew Gutmann, investment banker and the author of “How to Be an Investment Banker: Recruiting, Interviewing, and Landing the Job,” saysid the typical investment analyst “can routinely expect to work 90-100 hours per week or even more. A typical work day during the week might be 10:00 a.m. until 2:00 a.m.” During busy periods, investment analysts may need to pull all-nighters. For some, that’s the biggest downside of this career.

For others, however, that’s all part of the excitement. Some people enjoy their work so much and the camaraderie that can go along with shared long hours that the grueling schedule is actually a plus.

There are two additional pros that make this an attractive career option for some people. The first is the compensation. Junior analyst may be one of the most highly compensated fresh-out-of-college positions. According to Glassdoor.com, an average junior investment analyst earns about $78,500 in total compensation.

The second is the potential for career advancement. You may decide to become an investment analyst because you’ll learn so much in this role. Working in investment banking can be the first step toward building a career in private equity, hedge funds, or venture capital—or even founding your own company.

Is this the right career for you? Only you can decide if the trade-offs are worth it. Working as an investment analyst can mean forgoing a normal social life and struggling with exhaustion, but in this role you’ll also potentially be able to put a lot of money away in a few short years and then easily make the transition to a less stressful role.

(Last Updated on February 26, 2024)

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