There are many moving parts behind a successful investment. Whether you’re an independent venture capitalist or you have a large investment firm, you already know by now that thorough research is a must. Every industry has its intricacies and, to make sure your investment works out in the long run, you need to base it on facts, not hype and trends.
There are, of course, many ways to carry out this research. Some investors work best alone, they can take the time to analyze each potential investment individually and then act on those findings. However, this isn’t always possible. Investors also have day jobs and they may already be in charge of multiple processes in their organizations. Or maybe the scale of the investment is so large that they simply cannot risk making a bad move. In this case, the help of a securities analyst can be invaluable.
What does a securities analyst do?
A securities analyst is a financial expert who works with investors and provides essential insights into various industries and companies, helping them decide what investments have the highest chance of success.
Securities analysts know every movement of the market and track the evolution of stocks, sectors, industries, and economies. Gathering data from multiple sources, such as market reports and specialized publications, they can forecast the future performance of companies, and can thus give you advice on when to buy, hold, and sell.
In other words, a securities analyst can help you make informed decisions and tell you how much you’re risking by making a certain investment. Although they’re often called financial analysts or investment analysts, there are small differences between what these experts do, so the titles aren’t interchangeable.
Securities analysts have great technical and analytical skills and one of the most important benefits of working with them is they are impartial. These analysts don’t serve a specific industry or company. Instead, they are hired by investors, banks, or private equity firms to carry out extensive research and deliver market reports.
They can calculate the WACC of the investment, interpret spreadsheets and approximate a company’s correct market price, reducing the risk of a wrong move. It’s a complex job description that comes with several key responsibilities, but the question is: should you always collaborate with a securities analyst?
When should you work with a securities analyst?
Both individuals and companies can greatly benefit from the expertise of a securities analyst, but the number of times to decide to hire one depends on several factors:
- Experience. If you have been an investor for many years and you’ve developed an analytical sense, you already have the know-how to understand market trends and tackle some investments yourself, without outside consultancy.
- Major market events. An economic crisis, political unrest, or the emergence of new technologies can influence the market both in the short and long run. A securities analyst can help you understand these influences so that you can act accordingly.
- The size and risk of the investment. Small and safe investments don’t have the same stakes as acquiring a company or investing in a newly emerged industry. For these sensitive situations, it’s safer to have an analyst draw up some data.
If you’re in charge of an equity firm, venture capital firm, or any other organization that needs advanced finance solutions, you should always contact a securities analyst for key events such as:
- Mergers and acquisitions involve many financial issues, so it’s important to know the challenges well in advance. A securities analyst can help you determine the market value of the other organization and let you know if the merger or acquisition can put your own financial situation at risk.
- Financial restructuring, which is usually a part of complete corporate restructuring, involves reorganizing the company’s assets and liabilities. All companies go through this process at one point, but if you’re in a sensitive financial situation where you’re struggling with debt, a securities analyst can help you understand all the risks and mitigate their impact.
- Bankruptcy is always a challenging event in any organization, especially because of the financial pitfalls. Although to handle a bankruptcy correctly you will need help from more than one expert, a securities analyst should be a part of your team.
Is the securities analyst the same as a mentor?
To a certain extent, the input of a securities analyst is just as valuable as that of a mentor. When you don’t have enough market experience, or you’re in a sensitive financial situation, both the mentor and the analyst can help you make the right decision.
However, if a mentor’s contribution is more personal and subjective, an analyst’s contribution is based solely on facts and data, not personal experience. Securities analysts are paid to conduct market research, analyze company profiles, do studies, forecast the state of a certain industry, and then present this data to you. While a mentor can give you general investment tips and help you avoid common investment mistakes, a securities analyst will deliver the facts you need to make informed decisions.
But that doesn’t mean that you’re left alone to interpret all these numbers. It’s also part of an analyst’s job to explain what that data means and what course of action you should take. Ideally, every savvy investor needs both a mentor and a team of analysts to succeed. Navigating the intricacies of the market can be difficult, and the more experts you have on your side, the better. Combined with a mentor’s personal approach, the analytical skills that a securities analyst brings to the table can help you mitigate risk and make high-ROI decisions.