The world of investments and finances seems to be quite complicated at the first look. The big fat jargons like capital, shares, debentures, equity, stocks, dividends, etc. kind of imbibe a scary vibe to the unassuming common person. However, these aspects are not as fearful as it sounds. An understanding of the baseline concepts would ease out the difficulties in deciphering the arena of investment banking.
Taking baby steps
The first step towards understanding Investment banking is not only asking the correct questions. It is about asking the correct questions in the right chronological way. Therefore, the first question in understanding investment banking should be ‘What is Investment banking?’
The main reason for the difficulty in understanding investment banking is people generally start with the question ‘How to become an investment banker?’ which removes the scope of understanding about it.
Coming back to the preliminary question, investment banking essentially involves the area of the banking sector that is responsible for raising capital (money needed to run or start an organization or business) for companies, government institutions, or any other similar entities.
While raising capital is the primary function for investment bankers, there is a whole spectrum of other activities, which are duly congregated, in the wider umbrella of investment banking. Some of these important activities include:
- Underwriting new debts as well as equity securities for various kinds of corporations
- Aiding is security sales
- Facilitating Mergers & Acquisitions
- Helping in structuring reorganizations
- Assisting in broker trades for private investigators and various institutions
- Providing valuable guidance to the issuers with regards to stocks issue and their placements in the market
Choosing a career in Invest Banking
The profession of an investment banker is as prestigious as it sounds. The old-school method of landing a position as an investment banker is to ace an MBA graduation from prestigious business schools and work through the corporate ladder with the dual combination of hard work and connections. Being an Investment banker has its perks. The main teaser for this job is the handsome salary that one draws during the job.
Top Investment banks like Goldman Sachs, Morgan Stanley, etc. invest heavily in the recruits of investment bankers. Various studies and surveys suggest that investment bankers earn around 100,000 USD annually during their initial days in the industry. Another aspect that makes the earnings of an investment banker quite lucrative is when they earn in the range of 25 to 35 USD on an hourly basis. Given that most of them work like a hundred hours a week, the math can seem enticing.
It is not only the salary that is attractive for Investment Bankers but also several other pros as well. Like, for example, they get to hone their marketing skills while working in a high-pressure and top-performing environment. This in turn sharpens their soft and people skills as well.
These skills when combined with business, finance, and accounting abilities unlock a huge potential for professional growth thereby propelling ones’ career to great heights.
The other takeaway from being a revered investment baking is the connections one makes during the profession. As investment banking incorporates both private corporations and government organizations, an investment banker can easily make top-class connections, which would practically ease out their path in any kind of situation.
Is it that hard to become an investment banker?
Returning to the question that started this discussion is whether becoming an investment banker is hard or not, the answer can be both yes and no. If you choose the old-school method of studying with appropriate degrees and then landing a job, then yes, it might seem to be hard. However, we live in an ever-changing world, where almost everything is possible. Hence, with the correct approach, it is not as difficult as it seems.
It should be understood that becoming an investment banker is all about how well you know about how the current investment market functions well to the benefit of the company and your ability to perform so that the respective clients stay in a bed of perpetual profit.
While the first aspect is entirely dependent on ones’ research and homework, the second one is a matter of how well your connections are in the existing market. Therefore, having a good network is the thumb rule to succeed in investment banking.
The next point is the B-School. Top-notch B-Schools like those of the Ivy leagues have a comparatively smooth journey in the world of investment banking. Therefore, if your school is not in the top tiers, it naturally becomes a bit difficult to tread the path of investment banking. However, with patience, tenacity, and hard work, overcoming this obstacle becomes a piece of a cakewalk.
It can be stamped that experience speaks a thousand words more than the high-class educational certificates. The education imparted at schools is often done in a controlled environment and lacks the touch of practicality.
Therefore, having experience right from the field proves to be beneficial not only for the candidate but also for prospective employers. Hence, it is always suggested to plunge into the market as early as possible and gain maximum possible experience.
Last but not least in the list is the resume or the curriculum vitae. Even though judging a potential recruit is practically not possible through some pieces of paper, still, a decent resume goes a long way in earning a chance for interviews in prestigious investment banking organizations, which could eventually turn out to be recruitment opportunities.
While the silvery world of investment banking seems like an enticing opportunity, it has its darker side as well. Work-life balance is almost non-existent for investment bankers. Too much stress on the job often results in mental tension and an ensuing sedentary lifestyle results in various physical problems at quite an early age.
Hence, one must note it out to have a stable work-life balance despite the job pressures to ensure a stellar performance not only in one’s career but also in life as well.