My Letter to Young Analysts

“But there are all sorts of analysts in the investment world, including many that have titles that don’t contain the word “analyst.” An analyst, then, is simply someone who analyzes, who examines an investment problem with a critical eye.” – Tom Brakke

Tom Brakke from The Research Puzzle has put out an excellent resource for new entrants into the field of portfolio management with an ebook called Letters to a Young Analyst. The book is full of advice for young people on what they need to know and understand as they make their way into the investing industry (and the advice can definitely be used in other fields as well).

Brakke gives his own thoughts but also includes some well-known investment professionals that share their collective wisdom including Barry Ritholtz, David Merkel, Bob Seawright and Aswath Damodaran to name just a few.

I’m not exactly a veteran of the industry, but I’ve been working in portfolio management for over a decade now. So I decided to add some of my own advice to young people just starting out or looking to find a career in this space.

Talk to People in the Investment Industry. If you’re having a hard time finding a job find a way to ask people in the industry out for coffee or lunch. Don’t spend the entire time talking about yourself. Ask them about their career path. How did they get started? What are their favorite business or investing books? What would they do differently if they were just now starting out in the world of finance? Remember, people love to talk about themselves. This is a great way to learn and network.

Ask Questions. Along those same lines, if you do find a job as a young analyst, be inquisitive about everything. When I first started out I thought every foreign subject was up to me to figure out. There is something to be said for a trial-by-fire, but the best way to get to know how your superiors think is to simply ask them when there is something you don’t understand. It also shows that you care and have an interest in your work. Assuming you don’t ask the same questions over and over again, this shows your employer that you can be a quick study as you pick things up.

Read Books. I was never one of those Ivy league-born-and-bred-banker-types that was reading Barron’s in middle school and making stock picks as a teenager. It wasn’t until the end of my senior year of college that I finally realized I wanted to work with investments. So when I had my first internship I had no idea what my co-workers were even talking about half the time because I didn’t understand the language. I learned fairly quickly to start reading every chance I got to play catch-up. This was not only a great way to figure out what was going on, but I also received a crash course in market history and investing strategies as well.

It’s more exciting to strictly pay attention to the news of the day, but without a base of knowledge in history and the language of the pros the current market news won’t mean anything to you.

Back Up Your Opinions With Solid Data. When you first start out no one is going to take your opinions at face value. You have to earn the respect of your colleagues and that usually comes with time and experience. Until that happens, back everything up with research so they are forced to listen to you through the evidence you present.  It’s easy to argue with opinions.  It’s much harder to argue with data.

Perfect Your Elevator Pitch and One-Pager. The majority of the of data and reports you will be producing on a daily basis probably won’t always get looked at by your superiors. Since your opinions are at the low end of the totem pole, you need to be able to perfect your 990-second elevator pitch or a simple one page report or email that sums up all of your findings.

Don’t try to overwhelm them with busy models. Get to the point. People are busy and don’t have time to dig into every piece of analysis you create. Narrow everything down until you are able to explain it to someone outside the world of finance. That’s when you know that it makes sense.

Find a Mentor. Experienced observers are probably best, but this doesn’t necessarily have to be a gray-hair who’s been around for a long time either. It could be someone a rung or two up the ladder from you that can show you what’s what. Yet don’t go asking for favors right away. The best way to get someone to have your back is by helping them first.

But Have Some Perspective. The first really smart person you come across in your investment career will seem like they know everything and can do no wrong. Don’t succumb to this line of thinking. No matter how intelligent someone comes across to you, there is always going to be someone smarter than them in the financial markets. In fact the smartest people I have come across have always been willing to admit that they don’t know everything. More often than not, the best investors are also the most humble.

Think About Taking the CFA Exam. Will the CFA designation automatically make you a better analyst and investor? Of course not. There are plenty of great investors that don’t have their CFA just like I’m sure there are terrible investors that do have it. But if you are looking to find your way into the industry and don’t have a ton of experience, signing up for the CFA exam (and hopefully passing the level you are sitting for) is a great way to show potential employers that you are committed to bettering yourself.

There is something to be said for the discipline and dedication it takes to study in excess of 300 hours for a test that’s only offered once or twice a year, with basically no teachers to help you. I’ve seen and heard of plenty of instances where job candidates either got the position or at least an interview simply because they were signed up or passed a certain level of the CFA exam.

My final piece of advice is to never stop the learning process.  No matter how much you think you know coming right out of school, you will be amazed how much more you know in five years.  And five years from then…it really never stops.

Here’s a link to Tom’s website where you can find his book:
The Research Puzzle


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