What Does An Investment Analyst Do?

Are you an investment analyst or aspiring to be one? An investment analyst, also known as a financial analyst, reviews the performance of various types of investment and provides advice to help stockbrokers and traders make investment decisions.

Investing in the stock market is a passing thought that a lot of people have, especially when you hear stories about stocks that have skyrocketed. It is complex, however, and this can put people off.

The truth is, to make money on the stock market takes a lot of research, careful planning, and strategic execution, all of which are skills a good investment analyst should have.

This article highlights key activities investment analysts carry out as part of fulfilling their roles on the job.

1. Predicting Market Trends

The first step investment analysts take before making a trade involves understanding how the market they are interested in sits within the global economy.

For example, if an analyst were interested in the electric vehicle manufacturer Tesla, they would take the time to understand the consumer habits of motorists in general and the electric vehicle market. If research indicates that there is likely to be a surge in the general interest in electric vehicles over the next few years, then Tesla would be worthy of further investigation.

2. Interrogating Prospective Trades

Once the investment analyst has identified that the market is viable, they then look closely at the individual company, its financial status, and the company's mission statement. Forward-looking companies are generally better candidates for investment, as they are more likely to stay ahead of the curve and do well. Finally, the stock performance needs to be reviewed. Taking the Tesla example, their stock price has already skyrocketed because their potential for success is well known, and as such, they might not make for great investment because they may not gain much more value in the future.

An underrated electric vehicle provider, however, who is offering something different to Tesla - for example, a budget model car, could be a good investment.

3. Timing

Timing is everything. When looking at a company's stock performance, an investment analyst also looks out for patterns, bearing in mind that the stock price and the company value are not the same. The stock price reflects the perceived company value based on shareholder actions and is often indicative of things the company will be doing in the future. Investment analysts need to be predicting consumer trends ahead of everyone else to be successful. 

4. Tracking Portfolio

When investing, as with most professional ventures, it is important to set and track clear budgets. Analysts should never invest more than they can afford to lose. Tracking a stock portfolio can be a complex job, but there is an option to engage fund accounting specialists to help with this. 

5. Setting Clear Goals

When planning an investment strategy, investment analysts must know what share price they think an investment will reach so that they can tell when to take profit. It's also important to place a limit on how low the stock price should go before cashing out. This is known as having a backstop position.