Investment Banking: The Ultimate Guide

 Investment Banking: The Ultimate Guide

Investment banking is a financial service that provides assistance to companies and individuals in raising capital by selling their securities, sharing market research on stocks and bonds, meeting with company executives to review corporate strategy, arranging the public offering of securities for the issuing company.

Investment Banking Overview

Generally, when a company wants to raise capital through the sale of stock or bonds ($100,000 – $1 million), it must first hire an investment banker to work with them for no fee and assist in finding potential investors and help manage the entire process. An investment banker will have a degree in finance, statistics or economics. The firm will live or die by the performance of its investment bankers. Therefore they are paid very competitively as well as have stock options and other incentives if they perform well.

Investment banking, also known as IB, is not confined to the creation of debt securities. The role of an investment banker is broad and includes company analysis, mergers & acquisitions, joint ventures, public offerings and capital raising. These recommendations make up almost the entire equity portfolio of today’s investment banks.

Roles and Responsibilities

Investment banker are required to be well-versed in economics, finance and statistics. They need an aptitude for mathematics, logic, and an ability to understand the drivers of business performance and financial markets. An investment banker may work closely with a company’s management and board of directors or set up a specialized group within the firm to perform this role. The role of these groups is advising companies on how to make their operations more efficient, either through internal measures or by offering them merger opportunities. Good investment bankers will have contacts throughout the US and other markets and will obtain information as to what the potential companies are doing or if they are for sale. They can buy these companies on behalf of clients or find merger partners.

How to Become an Investment Banker

There is no formal degree program that will prepare an individual to become an investment banker. However, a number of universities provide courses for MBAs and MSF degrees, which are highly sought-after by financial institutions. These programs adequately educate students on the basics of finance and entrepreneurial management skills. Students from non-finance backgrounds can easily switch into the major in order to gain entry into the investment banking field. At undergraduate level, they might have majored in business administration or accounting.

The fundamental skills that an investment banker will need to acquire will include:

Ability to make decisions under pressure. Investment bankers have very little time to complete their work. Due to its competitive nature, they must complete a huge volume of work within a very short time. This means they are required to be very fast and efficient. Most banks will pay handsomely for individuals who can outperform others in this area and get the job done on time and on budget.

Investment banks are involved in the securities market, which includes the analysis, trading and management of equity and debt securities. In order to become an investment banker one must acquire a broad range of skills including decision-making under pressure and analytical skills. There is no formal degree program for investment bankers but students with a business administration or accounting background can easily switch into the major to gain entry into the field. The fundamental skills that an investment banker will need to acquire are decision-making under pressure and analytical skills.

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