Investment Analyst: Meaning, Education, Positions

What Is an Investment Analyst?

An investment analyst is a financial professional with expertise in evaluating financial and investment information, typically for the purpose of making buy, sell and hold recommendations for securities. Brokerage firms, investment advisors and mutual fund companies hire investment analysts to prepare investment research for multiple purposes.

The most prestigious certification an investment analyst can receive is the Chartered Financial Analyst (CFA) designation. They often have to use a variety of formulas and means to identify information.

The Basics of Being an Investment Analyst

An investment analyst researches economic conditions, company information and market trends to determine business, sector and industry recommendations for buying or selling stocks or mutual funds. A stock analyst stays updated with developments in his industry focus and creates financial models estimating future outcomes for companies and the economy. An analyst evaluates historical and forward-looking financial data, typically through advanced financial models. They study and incorporate research on economic and business trends for a specific industry, geographical region or type of product.

Investment analysts broadly come in two types: buy-side analysts and sell-side analysts. Buy-side analysts work for fund managers at mutual fund brokers and financial advisory firms. They research companies in their employers' portfolios, as well as other companies that may represent profitable investment opportunities. Based on this research, they prepare reports that offer buy and sell recommendations to management.

Sell-side equity analysts often work for the big investment banks, such as Goldman Sachs. Their jobs entail researching the financial fundamentals of companies the bank is considering taking public and determining which ones have the strongest potential to become profitable.

For aspiring financial analysts, one of the most important decisions is whether to specialize as an equity analyst or pursue another niche under the broader umbrella of financial analysis. The following comparison explains some of the subtle differences between a career as a financial analyst and an equity analyst.

Analyst Education

An undergraduate student typically majors in finance, computer science, biology, physics or engineering and takes courses in business, economics, accounting and math. A master of business administration (MBA) is also often preferred for senior investment analysts. Investment analysts may also seek Financial Industry Regulatory Authority (FINRA) securities licensing which requires corporate sponsorship. Securities licenses often required by investment analysts include the Series 7 general securities representative license and the Series 63 uniform securities agent license. FINRA licenses are typically associated with the selling of specific securities as a firm’s registered representative. Investment analysts may also seek to obtain the Chartered Financial Analyst (CFA) certification.

Analyst Positions

Investment analysis expertise is required in numerous senior investment management roles. A portfolio manager chooses, manages and presents products, industries and regions for a company's investment portfolio. Portfolio management is required for a broad range of responsibilities within the investment management industry. Portfolio managers are hired by investment companies to manage all types of funds with various objectives and fund structures. Portfolio managers are responsible for analyzing market conditions and investment securities and making buy and sell decisions for the fund. 

A stock investment analyst works on either the buy-side or sell-side for a business. A buy-side analyst is primarily a portfolio management analyst creating investment research and investment recommendations for portfolios with large amounts of capital such as mutual funds, hedge funds and insurance companies. A sell-side analyst advises financial service companies on securities, such as stocks or bonds.