Last Updated: August 09, 2021
Equity Research as a Career
Equity research is a sector in finance that rewards curiosity and knowledge, and it entails a lot more than just pure finance and accounting skills. Equity research is a perfect way to launch a career in finance. There are plenty of exit opportunities available after a successful stint in equity research with opaque industries such as private equity and hedge funds which are some of the money-spinning options.
Equity research is a procedure wherein one is involved in a detailed study of the financial framework of companies, monitors and analyzes notable information based on stocks and market trends. Equity research is important for potential investors and clients of an association to decide where, when, and how they should be allotting funds. This involves an in-depth understanding and evaluation of the economy, market environment, companies, industries, competitors, and so on. One needs to have sound knowledge, updated information, and expertise regarding stocks and investments (to sell, buy, or sustain) to make fruitful decisions and provide strong recommendations to a company.
Requirements for a Career in Equity Research
- An undergraduate degree in subjects like business administration, commerce/finance, statistics, or economics will be required to have foundational knowledge in equity research. This will help students get hired for entry-level jobs in various firms as accountants or assistants, which will also be beneficial to gain basic experience.
- After the completion of an undergraduate degree, one can opt for further education with a master's program in Business Administration, Statistics, or Commerce. This gives greater scope of getting employed for positions of higher value in some companies, even though it is not mandatory to climb up the ladder.
- Expertise in market analysis
- Excel skills
- Accounting and Mathematical skills
- Analytical skills
- Ability to work under pressure
- Strong research skills
- Communication skills (Oral and Written)
- Presentation skills
- Decision making and Problem-solving skills
One can start as a generalist in equity research and then move into industry-specific groups, i.e. oil & gas, or bank and financial institution stocks. There is a whole new skill set that will be needed based on the specific industry. For instance, oil stocks of companies that are mainly upstream (exploration and production) rely more on net asset value rather than the commonly used DCF (discounted cash flow). In this case, production, reserves, and prices are some of the most important values that will have to be considered. In the case of oil & gas, there will be a specific modeling test that can often be as long as 6 hours. This is a similar format in most equity research interviews. Excel skills, the skill of valuation, financial modeling skills, and passing the chartered financial analyst examination will undoubtedly help push the candidate to the top of the pile when it comes to landing a position.
Popular Career Options
The popular career options in the area of equity research are:
Equity Research Associate
An Equity Research Associate works under the supervision of a research analyst, assisting them in conducting surveys and research through various sources. The information collected based on the comprehensive study of relevant companies, investors, and market trends is later utilized for developing new models or investment ideas and making appropriate recommendations for investments. Other responsibilities include holding meetings, managing presentations, and handling potential clients and investors.
Qualification and Salary
- The job of an equity research associate is generally considered to be an entry-level job but requires a few years of training or work experience in a related field to be qualified. Working as a junior analyst in the initial phases (wherein one assists the equity research associate) will be highly advantageous for the candidate. A bachelor's degree in commerce, business administration, economics, or statistics is the educational requirement for the job as an associate. The average annual income of an equity research associate may be estimated to be approximately $70,000 and may further increase up to $150,000 based on the company, location, and expertise.
Equity Research Analyst
An equity research analyst is in charge of handling potential investors and clients of an association to decide where, when, and how they should be allotting funds. This involves an in-depth understanding and evaluation of the economy, market environment, companies, industries, competitors, and so on. Major responsibilities include researching stocks on either the buy-side or the sell-side, analyzing the data collected, publishing the information, and negotiating with investors from both sides.
Qualification and Salary
- A candidate must have experience in the field, either as a trainee (a research associate or a junior research analyst), or with the help of internships after completing an undergraduate degree in subjects like business administration, commerce/finance, statistics, or economics. A master's degree in business administration, statistics, or commerce will give a greater chance of getting hired. Passing the chartered financial analyst examination will be a bonus for the candidate. With enough experience and skills, one can climb up the ladder as the senior research analyst or the research head of a company. The average annual income of an equity research analyst is approximately $83,000 and may further increase based on the association, location, experience, and expertise.
Other Related Career Options
Equity research is an ideal career path for individuals passionate about economic research, finance, and market analysis. However, with the use of these skills, one may also opt for jobs not directly involved with equity analysis but within the parameters of equity research. These are known as exit opportunities wherein an individual can utilize their skill-sets to related careers after gaining a certain period of experience in equity analysis. The popular exit opportunities are:
The job of a risk analyst is to analyze market trends, and recognize and follow up on the changes that occur in these trends, thereby, providing assistance to businesses, banks, or insurance firms with regards to potential risks. These analysts are required to calculate and understand the risk involved in various investments and provide ideas to prevent risks or give solutions to recover from risks.
An undergraduate degree in subjects like business administration or related subjects, with a specialization in risk management, is required. It is important that the candidate has a minimum of four to five years of experience in the financial sector to be hired as a risk analyst. The average base income of a risk analyst is around $66,000 annually.
Hedge Fund Manager
A hedge fund manager analyzes and monitors the market trends and positions, and provides appropriate investment strategies for hedge funds. They are required to monitor and review reports of cash flow, profit, and loss for effective decision-making. To be a hedge fund manager takes years of experience in the field of financial research with an undergraduate and graduate degree in finance or related fields.
The role of a hedge fund manager involves risk but is also a lucrative career. The average base income of a hedge fund manager is around $145,000 annually.
Commercial Credit Analyst
The role of a commercial credit analyst is to monitor and analyze the credit details (cash and assets) of several business firms, banks, or companies to assess loan requests and statements. They are required to examine loan applicants by evaluating required documents to get an idea of the borrower's financial stability.
An undergraduate degree in subjects like business administration, or commerce/finance, along with training will be sufficient for this role. Adequate skills in communication and computer programming are a bonus. The average base income of a commercial credit analyst is around $57,000 annually and may increase with experience and expertise.
A trading analyst studies the latest market trends and statistics based on different regions and collects data. Based on the collected data, one provides services for stock investors, buyers, and sellers, and gives ideas on sales transactions. Additionally, they are required to publish reports based on findings, manage presentations, and report predictions based on research.
To work as a trading analyst, one has to complete an undergraduate degree in commerce or related fields, and also secure a master's degree in business administration. In some companies, they require the candidate to have a license. The average base income of a trading analyst is around $70,000 annually. Additional bonuses are included with each completed deal.
The best way to build up one's skill set is to sign up for courses on reputed websites such as Mergers & Inquisitions, etc., as they give away a substantial amount of free material. When taking into consideration that equity research salaries routinely run into a range as high as $100k even at the preliminary level, spending a lump sum amount on such courses is well worth it
To advance in equity research, it is essential to build a good track record of being accurate with stock pick predictions. It is beneficial to be active in the markets and use funds and investments to showcase one's passion for investing. Reading news daily, and being updated with content available on websites such as 'Seeking Alpha' and even upcoming ones like 'Market Consensus' will develop some of the technical skills and keep one in the know. There are also several of the big names such as Bloomberg/Reuters and CNBC to turn to.