Investment Banking & Investment Management

Career Myths Debunked: Equity Research

Specialisation is key to a successful career in equity research. Also, good stock recommendations aren’t the only thing you’ll need to worry about!
Tan Hong Li
Global Investment Research at Goldman Sachs

Myth #1: Anyone can do research by compiling information from the internet 

While the definition of research is very broad-based, the scope of research in the sell-side is very well-defined, and requires information beyond what can be gleaned from the internet. An analyst can typically start out his/her career in equity, fixed income or economics.

Myth #2: The job requires you to research anything under the sun

Equity research analysts on the sell-side are focused only on a particular sector of stocks (e.g. property, banks, energy, consumer sectors, etc.), as opposed to understanding multiple sectors.

Specialisation is a necessity, as job success hinges on providing detailed and accurate company and industry knowledge, trading ideas, and company management access.

Myth #3: Your job involves placing good stock recommendations

Good stock recommendations are an important outcome for sell-side equity research analysts, but there are other important aspects:

  • Detailed financial modeling for the companies (and sectors) being covered
  • Generating good stock ideas — buy, hold, sell ratings
  • Writing industry or company-specific reports
  • Marketing the content of your analyses to institutional clients
  • Meeting management to understand more about a company’s business plans

Myth #4: Sell-side research makes money through investment management

While making stock recommendations is a part of the job, the sell-side research practice does not trade on their stock ideas. Rather, it generates revenues indirectly, primarily through commissions when the buy-side trades through the sell-side trading desks.

Breaking into the industry

Vying for a front office job in a financial institution, or landing an equity research analyst role is not easy. There are however, preparatory steps that can enhance your chances.

Aim for a decent GPA. While your GPA is absolutely not a make-or-break to get a career in finance, a good GPA definitely helps to get past the résumé gatekeepers and gain an interview opportunity.

Actions speak loudly. Whatever the area of interest for your career, pursue active steps to strengthen your overall credibility. For example, if your passion is in trading, display your keen interest by joining stock competitions.

Keep trying and do not give up. Despite putting in hard work, finding a good internship or job can be hard. Sometimes, the results can be beyond our control, but the only way is to keep learning, keep trying and be patient. 

Good things will come to those who work for it, all the best!