Equity Analyst, also known as Equity Research Analysts are professionals responsible for examining financial data and providing viable investment opportunity recommendations to companies.
While some analysts work in-house to assist their employers make good investments, others are hired as third-party consultants to lend their expertise.
Equity Analysts are one branch of the whole tree of financial analysts. Some financial analysts look at the overall picture, analyze the general market trends and locate profitable investments in different industries and market segment.
While some break the investment opportunities into bits, company-by-company, trying to identify the investment potential of each of these companies. Professionals who do these are known as equity research analysts.
So, if you want to become an equity research analyst, this article is for you, as it contains all you need to know about becoming an equity analyst.
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What is Equity Analysis?
Equity analysis is the process of analysing a companies fundamentals, financial statement analysis, and financial modeling for equity recommendations.
Equity analysis, also known as equity research deals with commodities and bonds. It offers macroeconomic views and derivatives analysis when required by working with the derivatives division of the brokerage firm.
Sell-side analysts work for brokers who sell shares to the investors (mainly fund management firms and private clients). While buy-side analysts on the other hand work for fund management firms.
The main goal of equity research is to provide in-depth analysis of a sector, company or stock, and to use this information in assisting investors in allocating their funds properly.
In general, you can say that equity research involves studying a company’s finances to see how strong its core business operations are.
Who is an Equity Analyst?
An equity analyst is an individual who is responsible for providing analysis, recommendations, and reports on viable investment opportunities that financial institutions and investors are likely to be interested in.
Equity analysts start by doing financial modeling and analysis and are responsible for covering a group of companies or a particular sector. They produce research reports, projections, and recommendations about companies and stocks.
Typically, an equity analyst focuses on a small group of companies in a particular industry to develop the high-level expertise needed to make accurate projections in the financial sector. More so, they monitor market data and news reports to update their research daily.
In addition to all these, equity analysts issue buy, sell, or hold recommendations to potential investors.
In a big firm, associates and junior equity analysts are often recognized for their work by naming their findings in research reports that are distributed through the company’s media channels.
While senior analysts on the other hand are often sought after by media channels to comment on released reports of the company’s earnings.
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What does an Equity Research Analyst do?
Generally, equity research analysts are responsible for providing reports, analyses, and recommendations of the best securities that investors are likely to be interested in.
Hence, their responsibilities include but are not limited to the following;
- Analyze trading of particular companies on stock exchanges and write frequently on findings of the same trade.
- Develop financial models to accurately reflect companies’ overall performance and valuation to help make reasonable investment decisions.
- Maintain a detailed list of companies and monitor all developments on those companies
- Review and interpret cash flow statements, income statements, and balance sheets on publicly traded domestic and foreign companies.
- Provide in-depth research on the industry and individual companies and help generate timely and accurate investment recommendations.
- Calculate financial ratios and perform exchange rate calculations.
- Research and analyze specific company financial information and fundamentals.
- Develop, maintain and analyze generic and specific company, industry, and market overviews.
Furthermore, equity research analysts work full-time. It can be compared to what it’s like to be a university student, as there are lots of “assignments” and “paperwork” due with regular deadlines. Hence, they are required to have lots of skills.
How Can I Become An Equity Analyst?
The journey to becoming a good equity analyst starts from high school where you learn basic art subjects like Economics, Accounting, Maths and other related subjects.
After high school, you can proceed to get a bachelor’s degree in a relevant business discipline such as finance, economics, accounting, or business administration.
You can also opt for undergraduate degrees that provide in-depth quantitative training such as degrees in Mathematics, Statistics, Engineering, and other relevant subjects.
Conversely, a Master’s degree is not required to advance into senior analyst positions. However, having one could pave the way to advance to fund management positions.
Another way to begin your career as an equity analyst is to apply for internship positions. As it serves as a good way to get your feet to the door of any top financial firm and learn all you need to know.
In general, the equity analyst field is highly competitive. So, having a degree from a top school can make your application more valid.
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Advanced Positions in Equity Research
Some junior analysts work for several years and then return to school to earn a Master’s degree.
Although a Master’s degree is not compulsory to advance up the career ladder. It’s still needed if you want to advance up to senior funds management roles.
A senior equity research analyst who has a high level of expertise in his or her area, and has a Masters’s degree can move into an investment management role. This position allows you to manage the investment of people and their investment portfolio.
An investment portfolio manager is responsible for using the information supplied by a junior analyst to manage the mix of securities in a portfolio daily.
Qualifications for an Equity Research Analyst
The predominant professional qualification for equity research analyst and others managing securities is the Chartered Financial Analyst (CFA) designation, from the CFA Institute.
To get this qualification, candidates are required to have a minimum of four full years of qualifying experience. And pass a series of three examinations.
More so, its often considered as a qualification needed for advancement into senior positions in the field.
In addition to this, most equity research analysts require operating license from the Financial Industry Regulatory Authority (FINRA), a national body that manages securities firms and brokers.
Buy-Side and Sell-Side Analysts
Buy-side analysts work for fund managers at financial advisory firms. The research company’s portfolio, as well as other companies that may pose as profitable investment opportunities.
Results from this research enable them to prepare reports that offer buy and sell recommendations to the management.
While sell-side equity analysts often work for big investment banks, such as Goldman Sachs.
Their jobs involve researching the financial fundamentals of companies the bank is considering taking public. Determining which ones have the strongest potential to become profitable.
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What Skills Do I Need to Become an Equity Research Analyst?
To excel in the equity research analyst field, you need to have the following critical skills;
- Analytical thinking – equity analysts should have extensive experience assessing financial data and using it to make informed decisions about stock and bond performance
- Market knowledge – thorough knowledge of a particular market is also an asset for equity analysts since this allows the analyst to consider their data in terms of the market or sector as a whole.
- Data modeling – equity analysts should be skilled with a variety of data modeling techniques and should be able to prepare reports and presentations that present useful and actionable data.
- Trendspotting – They should be able to notice, track, and analyze market trends and opportunities and determine how to strategically invest to capitalize on growing or untapped sectors.
- Communication skills – equity analysts should be strong communicators, able to succinctly present data and information to brokers, investors, and advisors in both verbal and written formats
- Ability to take initiative and meet deadlines under minimal supervision
- Industry experience in specific fields such as mining, manufacturing, technology, or transportation is an added advantage
- Strong proficiency in MS Office, Excel, Word is needed.
- Proficiency in Bloomberg or Capital IQ, or other data mining software is a plus.
If you are not sure if you have these skills, consider taking online courses that will help you develop these skills.
What Are The Best Schools For Equity Research Analysts?
Below is a list of equity research analyst schools. Our selection criteria for these schools are the education quality, earnings of graduates, top employers of its students, and highest numbers of graduates to “Wall Street.”
The best schools for students who want to be equity research analysts include;
- Amherst College
- Baruch College
- Boston College
- Columbia University
- Cornell University
- Dartmouth College
- Duke University
- Georgetown University
- Harvard University
- Middlebury College
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#1. Amherst College
Tuition: $76,800
Amherst College is a good school to consider if you want to further your career as an equity research analyst.
Although there is no direct program that allows you become an equity analyst, there are options to study Economics, Accounting and other relevant subjects.
#2. Baruch College
Tuition: $3,465 per semester
Baruch college is one of the high-ranking colleges in the United States known to be at the center of Wall Street and global headquarters of major companies, giving students unparalleled internship, career, and networking opportunities.
Its Department of Economics and Finances is known to produce top graduates that work in big finance firms across the country.
#3. Cornell University
Tuition: $60,286
Cornell University is a private research university in New York known for its wide range of programs that prepare students for a career as an equity research analyst.
This school offers an Applied Economics & Management program that is designed to provide foundational knowledge of economics and how it affects the economy of the nation.
#4. Duke University
Tuition: $57,934
Duke University is another great institution to consider if you want to become an equity research analyst.
This school offers a great curriculum featuring skill-based learning through classroom instruction, fieldwork, as well as opportunities to develop a strong portfolio.
#5. Harvard University
Tuition: $51,904
Harvard University is the frontier of academic and intellectual discovery. It s a research university focused on creating educational opportunities for people with many livid experiences.
The school offers a great curriculum for students who want to become equity research analysts later on.
How Much Does it Cost to Enroll For an Equity Analyst Program?
All the schools mentioned above do not offer direct programs to become an equity analyst. However, they offer degrees in relevant subject like Finance, Accounting, etc. to individuals who want to become equity analysts.
Furthermore, the cost of getting into either of these programs is dependent on quite a number of factors. With the first being the school.
Most schools charge higher tuition for out-of-state students. While, some schools charge flat tuition regardless of residency.
Another key factor is the number of programs. A school that offers a greater number of programs is bound to charge more compared to that with a lesser number of programs.
In general, per-credit costs of related relevant equity analyst programs typically range from $350 to $3000 for students in a standard or full-time program.
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How Much Do Equity Analysts Earn?
Equity analysts earn based on a variety of factors. One of which is if the analyst works on the buy side or on the sell side. Also, according to PayScale, the average salary for an equity research analyst is $80,536 per year. While BLS reports that the median annual wage for an Equity analyst (also grouped as a financial analyst) is $62.67 per hour and $130,360 per annum.
What is the Job Outlook for Equity Research Analysts?
Data from the US Bureau of Labour Statistics shows that the overall employment of equity analysts is projected to grow at a faster-than-average rate of 11 percent through 2026.
As the financial market continues to take several forms, more equity analysts will be needed to manage the inflow of funds, provide profitable investment opportunities, and make viable investment recommendations.
Do You Need a CFA to Be an Equity Analyst?
Equity research analysts benefit from having a foundation in statistics and mathematics. The majority of senior equity research analysts hold a master’s degree. For analysts who desire to advance in their careers, earning a Chartered Financial Analyst (CFA) qualification from the CFA Institute is advised.
What Is Equity Analysis?
The method of analyzing markets and businesses to recommend stocks to individual clients and professional fund managers. Analysts on the sell-side work for brokers who market shares to investors (mainly fund management firms and private clients).
How Many Hours Do Equity Research Analysts Work?
Workweek averages range from 55 to 60 hours, with peaks of 70 to 80 hours during the paying season.
What Does an Equity Analyst Earn?
In Sydney, an equity analyst makes a yearly income of $132,944. The additional cash remuneration for an equity analyst in Sydney ranges from $1 to $314,741, with an average of $25,000. Salary estimates are based on 26 salaries posted by anonymous Equity Analyst employees in Sydney to Glassdoor.
How Do Equity Analysts Get Paid?
The typical annual salary for entry-level equity research associates at large investment banks is $150,000, with base wages accounting for 75% of that sum. The pay for VP-level analysts ranges from $200K to $300K annually, but it might increase to $600K for senior analysts.
Do Analysts Get Paid Well?
Yes, data analysts do earn a significant salary. The average annual wage in the US is $58,260, according to the Bureau of Labor Statistics (BLS). Data analysts typically earn much more than that.
Conclusion
Becoming an equity research analyst isn’t as difficult as it sounds. In fact, it is a good career advancement for individuals who studied Economics, Finance, and Accounting.
Learn about the job description and how you can become a successful equity analyst here.
All the best!
FAQs
What is CFA salary in India?
Chartered Financial Analyst Salary in India
The average salary of CFA in India is ₹9 lakhs.
Is CFA better than CA?
CFA has to be a viable option for you only if you want to acquire more knowledge and expertise in training in financial or investment sectors as an analyst. On the other hand, if you want to better your number-crunching skills, accounting, auditing, and taxation, you must consider CA as your career option.
Is CFA harder than MBA?
The CFA will require more accounting knowledge than will the MBA to be successful. However, the MBA is not limited to mathematically based courses. In a well-rounded MBA program, you will be exposed to management, empathy, organizational design, marketing, writing, etc. it’s not a matter of which is harder.
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