What Does A Financial Analyst Do?

"I have always been fascinated by the workings of the financial system and would like to pursue a career in this industry, specifically on investments. I told this to my uncle, who is also in the financial services industry, and he said I should consider becoming a financial analyst. Can you please provide more information about this job? What does a financial analyst do?"

asked by Bill D. from Madison, Wisconsin

In a nutshell, the job of financial analysts will be to guide clients—both institutions and individuals—in making sound investment decisions. They are instrumental in suggesting the stocks, bonds and other asset classes that clients should include in their portfolios.

In order to provide businesses and individuals with the best possible advice regarding the investments to include in their portfolios, financial analysts review data, both present and past, and look closely at trends in business and the economy. They try to see connections between political and world events to determine if these will affect the economy and more specifically, the stock and bond markets.

Financial analysts generally have their area of expertise where they follow trends closely. For instance, analysts who deal with the foreign exchange market must keep abreast of new policies and regulations and determine how the political and economic events happening in other parts o the world will affect the trading of currencies. Those analysts who specialize in international stock funds is interested in knowing how war in other parts of the world will most likely affect the value of the stocks.

Also called securities analysts or investment analysts, financial analysts meet with company executives in order to have a more complete understanding of its operations. Based on these discussions, they are able to gauge the company’s future performance and prospects.

Financial analysts can either be categorized as buy-side analysts or sell-side analysts. Those in the buy-side work with mutual funds, insurance firms, hedge funds, endowments and other institutional investors to come up with the best strategies for their money. Those on the sell-side, meanwhile, give advice to agents of financial services who primarily offer investment vehicles like stocks and bonds to buyers.

The jobs of financial analysts also differ on the type of analyst they are. Portfolio managers head a team of analysts and choose the portfolio mix that would serve a company’s best interest. Aside from being responsible for the overall performance of the portfolio, their job also entails explaining to investors the rationale behind their decisions and strategies. They also react quickly to market conditions and make buy and sell decisions based on what they know and at times, by following their instincts.

Ratings analysts are another kind of financial analysts who put their focus on the ability of organizations and governments to honor their debts. They conduct thorough evaluation and research of the company’s financial condition and report their findings to the management team that will be responsible for scoring the risk of default of a bond issuer.

Finally, risk analysts specialize in reviewing the risk of investment decisions and provide a way to help companies handle volatility and minimize possible losses.

Career Spotlight: Financial Analyst

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