I am sure you have done your homework. Yeah. You must have looked at LinkedIn profiles of people whose job you want (to snatch) and found out the obvious truth: They are most of the times engineer in their undergraduate years. Most of the finance jobs in India are being completed by Engineers (like me); however the story does not end here.
Probably, you may have heard of Investment Management as one of the streams of finance careers. They manage investments of people. What do they do? Typically, their LinkedIn profile speaks about the following:
- Asset Management
- Family Office
- Portfolio Management
- Equity Capital Market
One of the main traits of succeeding in this kind of job is that you have to think like investor.
How to think like an Investor?
Investor has to appraise some risk and has to take some of them and then seek returns in lieu of that. All these function operate in Stock market. Different schools of thought have taken the field towards increasing levels of mathematical sophistication and model-based regression forecasting, but the building blocks remain human actors and their behaviours. In this context, the greatest investor of all time, Mr Warren Buffet has epitomized Stock Market as Mr. Market.
Mr. Market is often identified as having human behavioural manic-depressive characteristics, it:
- Is emotional, euphoric, moody
- Is often irrational
- Offers that transactions are strictly at your option
- Is there to serve you, not to guide you.
- Will offer you a chance to buy low, and sell high.
- Is frequently efficientâ€¦but not always.
So in short, to be a successful investor you need to understand the behaviour of Mr. Market who is often, unlike what you read in CFA courses, IRRATIONAL.
Rational world teaches you 2+2 =4 but you can’t convince the same to Mr. Market. So the typical mathematical based or rather hard science based thought process has a big disadvantage in this context.
Humanities: Which streams has advantage?
Economics: It’s the actions of individual actors that determine economic reality, not the other way around. The field of economics attempts to understand the patterns of individual decisions within the context of a world that has scarce resources.
If you are a student of economics then you understand the Demand Supply concept quite clearly and can easily understand the basic tenets of how prices are determined in stock market also, because the root is always individual human action. You understand the incentive system better. So what is the Promoters incentive or what is investors incentive system, you can understand and mend your way quickly, which is required to be successful in dealing with stock investments.
Psychology: The market is made up of millions of person who are ultimately humans. Human are filled with their biases. The study of Psychology enables you to understand why market is the way it is. It helps you understand the emotion part of it.so if you read news about a company, then you can anticipate which way the share prices of the company will move.
Sociology: It is the study of social trends, how mob works, how crowd thinks etc. So it gives you an understanding of the world of company selling toys, furniture, cell phones or the company providing services to masses like IT, Banking etc. In other words, if the company you are looking at to invest is dependent on consumerisms of society, then who have studied the sociology have an edge.
The next big thing- Behaviour Economics:
Behavioural is a relatively new field that seeks to combine behavioural and cognitive psychological theory with conventional economics and finance to provide explanations for why people make irrational financial decisions.
Ultimately the stock market investment is more of an art than science and if you can showcase in interviews or resume that you have the knack for this kind of art then getting an Investment Management Job is not difficult. In life and career, what really matters are how you build upon the skills you have. Scared money doesn’t make any money and also scared mind do not get great jobs. So the summom bonum of the article is about being aware, it is about knowing one’s circle of competence and finally about developing confidence and proving mettle in interviews and likewise in finance career.