Sought-after jobs in finance

By Waldo Lavon

The world of finance provides some positions that are very rewarding to individuals, both in terms of compensation and in life fulfillment. Of course, different workers have varying personalities that can impact exactly which jobs would appeal to them. This article will detail some of the more sought-after finance jobs and the types of individuals that these jobs would appeal to.

Finance jobs can vary between investing/trading careers, accounting jobs that provide back-office assistance, and banking jobs. Since the repeal of the Glass-Stegal Act, banks have been able to diversify into investment banking which has required them to hire individuals with varying backgrounds including banking and investment banking. As a result of this, the job hirer has changed from a more boutique setting in previous years.

Many finance jobs involve managing money accumulated by investors and assisting them in selecting investments. These jobs involve locating capital, investing capital, and monitoring results.

Generally speaking, higher salaries are provided to those who can attract large amounts of capital. For attracting capital, many people oriented sales skills are necessary. These lucrative jobs are desirable for their close connections with people and the ability to earn significant amounts of compensation for the job.

Higher compensation is also given to those who can consistently outperform the market and earn outsized returns. These jobs involve reviewing financial reports, tracking the market, and selecting investments that appear attractive based upon current stock prices. These jobs are sought after for the compensation potential but also for those who have analytical minds that enjoy analyzing and investing in the stock market.

Accounting jobs are also attractive for some in the finance industry. These accounting jobs involve tracking fiscal results and developing financial statements to present to management and to investors regarding how these funds are doing. These jobs appeal to those who enjoy preparing and analyzing data, but who do not generally enjoy being in the forefront with significant interactions with customers.

Banking jobs, on the other hand, typically involve developing long-term relationships with clients and providing their banking needs for a long-term period. These jobs are sought after for the relationship you develop with clients and for the role you play in helping to develop their business.

There are many highly sought after jobs in the finance world that can appeal to jobseekers. Determine what role you want to play in capital markets and locate a job that appeals to your personality.

About the author: Waldo Lavon writes career guidance for those seeking marketing jobs or jobs in finance. He recently wrote an article on sales jobs.

How to choose what to invest in

Choosing what to invest in or how to best get involved with stock trading is ideally less like window shopping and more like an investigation if you want to base your choices on information rather than feelings. Some people still do choose what to invest in by what they feel is a good investment. However, at best, that is an intuitive approach to investing, and there are several other ways to go about choosing what to invest in that might be more worth while.

Fundamental analysis

Fundamental analysis studies the financial profile of a company in detail. This can be as in depth and comprehensive as one makes it. For example, one may simply look at a company's earnings per share for the past five quarters and choose what to invest in based on that. Others may be more thorough and study the company's revenue trend, profit margin, asset management, and so forth. What fundamental analysis doesn't reveal however, is the future.

Market performance

To glean how an investment will perform in the future requires a certain amount of informed foresight. For example, if it's the autumn, you can induce some birds will fly south for the winter. Financially, if it's a business that follows a business cycle and the high end of that cycle has passed, revenue's might decline. Businesses are not as predictable as bird's flight patterns however, so choosing what to invest in also involves looking at another aspect of the market.

Supply and demand

Businesses might not be worth investing in at all. If the demand for businesses services is lower than a commodity for example, then maybe commodities are a better investment. To know that an investor would look at any number of factors that can influence both the availability and need for a certain product such as corn. For example, when corn based ethanol became a legislated fuel additive, it affected the price of corn. However, if large amounts of  farmers were to switch to another form of feed for their livestock in the future, that could affect the price of corn as well.

Economic factors

Knowing how to choose what to invest in also involves understanding a little more about economics. Economics is like a barometer for markets of all kinds. For example, if an economy is in a long term secular trend what does this suggest for the market? It could mean business cycles will be suppressed despite demand, or it could mean prices won't rise much for businesses causing less profit if their costs do increase. The economy is made up of a lot of components such as employment, monetary policy, trade balance and so forth. Each economic component can affect how well an investment will perform.

Technical analysis

Technical analysis is the chartists way of choosing what to invest in. Chartists look at the price movement of a company's or product's price movement over time and draw conclusions based on patterns of probability. Technical analysis helps some investors choose what to invest in because they believe the patterns they see confirm a higher probability of a price movement. Although technical analysis is used more for short-term trading, investors may also use it to assess medium and longer term price patterns.

Diversification of Stock Market Risk

Investment diversification is a type of risk management that used by investors and refers to the spreading of investment capital through multiple financial instruments and/or economic sectors. An example of diversification is stock ownership across a number of industries such as oil, utilities, biotechnology, retail etc. Diversification is similar to hedging in the sense that it is employed to lighten negative impacts from downturns on a specific financial instrument, economic condition/sector, and localized investments.

Many people diversify their money in different ways. For example, someone may put money into a house, have a savings account, own jewelry, use a money market account, hold certificates of deposit (CD's), and save through Individual Retirement Accounts (IRA's) or a pension fund. This is diversification in the sense if one or other of these investments falls through, there is another to relieve the overall risk to one's net worth. The hallmarks of diversification are listed below:

• Distributes money across an array of investments
• Shields investors from volatile fluctuations in prices
• Broader investment net may capture otherwise unrealized capital gains
• Allows riskier investments while simultaneously limiting exposure to associated risk

Diversifying through mutual funds

Diversifying risk is easy to do if one has tons of money to spread around. However, for those who don't have millions of dollars, mutual funds do. What's more, mutual funds often consider diversification an essential part of their investment strategy even if it is just within one economic sector.

For around the first 30 investments an investor or mutual fund makes, the level of risk declines significantly, especially if those investments are across different industries. However after a certain point, the lowering affect diversification has declines making the risk to number of investment ratio change less and less. A few ways diversification in the stock market takes place including through mutual funds are listed below:

1. Diversified Mutual Funds
2. Investment in international as well as domestic stocks
3. Time spread investments i.e. dollar cost averaging
4. Selection of stocks that span a number of economic sectors
5. Investment in large cap, mid cap as well as small cap stocks and pink sheets
6. Ownership of stocks, stock mutual funds and exchange traded funds
7. Diversification through investment in multiple stock exchanges.

Other Types of Investment Diversification

Diversification can be achieved in a number of ways and at varying levels of risk. One can diversify through the methods listed above or one can diversify using multiple financial instruments. Some examples of this type of diversification includes the following methods:

• Low Risk Diversification

1. Low risk mutual funds such as precious metals, utilities and bond funds
2. Treasury Bonds, Savings accounts, Australian Government Bonds
3. Investment through IRA's, Life Insurance Policies and Certificates of Deposit

• Medium risk diversification

1. Investment in index funds
2. Diversification through middle capitalization and large capitalization companies
3. Capital investment in Bonds, stocks and higher risk mutual funds

• High risk diversification

1. Investment across a range of small capitalization companies
2. Diversification through a number of risky exchanges such as foreign exchange, futures and growth sectors of the economy.

Risks Typically Associated with Non-Diversification:

When one does not diversify, one's net worth can decline dramatically. An example of this is the Tech bubble of the late 1990's and the Housing Bubble of the middle 2000's. If an investor had all their money in either of these industries after the bubble burst they could have lost a great deal of money.

An economic 'bubble' does not have to burst for an asset class or industrial sector to have a correction of 10-20% because there are many integrated market forces that drive prices of financial instruments outside of abnormal pricing. While diversification does not eliminate all one's investment risk, it can present some very safe options depending on how risky the investments are.

How one diversifies is also important because as with any investment strategy there are many different ways to diversify. Some methods are better than others. For example, if one diversifies in secure and Government backed financial instruments one's risk will be lower than if diversification takes place through high risk stocks across a number of industries. Also the choice of investments one chooses to diversify with can create a combination of risk and return that is ideal for an individual investor.

In summary, investment diversification limits but does not eliminate risk. The safer the investments that are diversified, the lower the overall risk will be. Diversification can be achieved through mutual fund investing as well as through investment in multiple asset classes and financial vehicles. The benefits of diversification are well known and considered a beneficial investment strategy.