If you feel that investment banking is easy, think again. It is true that any person can start with investment banking, but only a few can gain profits. Investment banking is one such field that you may spend several years and still not become a pro at it. There are several aspects of investment banking that go beyond the perils of human understanding and knowledge.
One such aspect is discounted cash flow. One can easily say that discounted cash flow is the precursor for investment banking.
Even CEOs of large corporations find it difficult to fathom the depths of investment banking. They may be good in controlling costs, tapping new markets, finding new products, etc; but when it comes to investment banking, they are surely not in their comfort zone. It has been observed that only large corporations can allocate in-house employees dedicatedly to the task of analyzing the organization’s investment banking options. It is very common for the board of directors or top management to hire an investment banking service to do the investment banking research.
Investment banking services have dedicated teams and experts who go ahead a step further and provide perfect analysis. There are many investment banking options available, but all may not be suited for you or your company. Miscalculations can not only result in losses, it may even land the investment banker behind bars. There are rules and regulations that surround investment banking and you will have to be totally aware of them. If you are not, then it is most recommended that you hire an investment banker for you. Investments are done on the basis of financial statements and investment bankers totally rely on these statements to make their assumptions and predictions.
Moving on from investment bankers to investment banks, you will find that these entities are also equally important in the business of investment. Investment banks help organizations and even the government to raise money by selling securities. However, most importantly, investment banks act as middlepersons between the sellers and buyers. Investment banking services help sellers in preparing securities to be sold and they also interact with potential investors.
There are thousands of organizations and companies that are most willing to sell their securities, but all of them may not be profitable. So, investment banks hire professional investment or research analysts who can closely follow on the recent developments in the industry. The insights of these analysts act as guides for investment bankers to choose the right kind of securities. Most large investment banks around the world hire humongous teams of research analysts who pick apart the prospects of a company.
There are two types of research analysts – sell-side analysts and buy-side analysts. The sell-side analysts guide the investor whether to buy the stock or not. The buy-side analysts are actually the ones who will be plunking down cash to buy a particular security. Investment banks have the ability to convert pennies into millions; hence, it has become a very lucrative business option these days.
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