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In the past few years, more buyside companies are hiring analysts straight out of college, or without 2 full years of ibanking experience. If you are in one of these positions, the 6 tips below might be able to help you. My own experience is more in public markets, so it might not apply as well to people who are in private market/venture capital.

1. Be slow but steady in forming your view.

Granted, if you are in an investment role, then you are hired to have a view. However, one of the very common mistakes I've seen around me (and in myself as well) is when very junior analysts try to come up with a very comprehensive view FAST.

I don't mean that you shouldn't try to do you work fast--everyone loves a junior who can do their model/analysis/what have you as fast as they can manage. However, it is not a good idea to try to force a fast speed on forming your view. In most investment instruments, you need a certain amount of experience and "investment maturity" to know the big picture questions (where is the US economy going, how will asset allocation flow look like next year, what's the most likely scenario next year), how the market is going to react to certain information, and which driver in your thesis is the more important one.

To know a company/bond well is easier to manage than any of the above; thus, if you have ~1 year of experience following your coverage closely, you should be able to do that. However, to have an investment view is more complex, and it requires the more experience-based knowledge mentioned above.

I've often seen junior analysts forcing themselves to reach a very comprehensive view when they are not ready to answer any of the above. This is actually a bad thing for their own investment analysis because they are jamming many pieces puzzle into one piece; often, they don't have enough experience and time to reflect on what their implicit assumptions are, and it makes them slower to realize what are the mistakes that they can make in their analysis.

Part of this is due to culture--most teams will want you to have a view. However, I think most teams are also understanding enough if you are less experienced--they won't force you to come up with the whole picture (I mean, that's what your seniors are for). A good way to mitigate this for someone who has just started is to parse out your views for different scenarios. Instead of thinking to yourself:" I think interest rates will go up and therefore my real estate company will suffer because of higher borrowing cost", try: "In the case interest rates go up, my company might experience this; in the case interest rates don't go up because Fed changed its mind on tapering, my company might experience that, etc etc.". Always parse out your own assumptions at the beginning--you don't have enough experience to have a good handle on macro views yet, therefore, make sure you know which part of your analysis rest on certain macro/market-based assumptions you made.

Which leads to the 2nd point...

2. As a thought experiment, train yourself to think about macro

For most investors, the macroeconomic environment plays an important role in their investment analysis. At the places that I've seen or heard of, these decisions are made by the senior members of the team, which makes sense--not because seniority makes you smarter, but rather that those people have seen more of a "history" of the market, and their thinking can benefit from that knowledge more than yours can. However, if you want to progress in this line of work, you need to think about the big picture, in addition to the specific coverage that you work on. You shouldn't expect your macro views to be taken up by your team yet, but it's always a good practice for yourself. Think about: US data, European data, manufacturing survey data, commodity prices--what are the drivers of money flow in this world, and how does that affect your coverage? Try to think about the data instead of the ready-made analysis on these data that you get from sell-side emails, this will help you form a stronger impression of what's happening.

3. Track your activity/time spent at work

If you are a junior, chances are there are things you do at work that you can do more efficiently. Most people in investment roles don't try to waste time--after all, it's competitive enough without having ourselves as one of our enemies. However, you'd be surprised at how much improvement you can make. One thing that might help you is to track your activity at work, and see how much time you spend on each task. Are you spending a lot of time reading? Most of us have to do that, but can you do it more efficiently? Can you try to read the first line and last line of each paragraph and see if you can still come away with the crucial information? Can you make notes as you read to increase the ratio of things you remember? It's often difficult to keep track of everything when things get hectic, but I do recommend doing this (especially for people who are just starting) to see what kind of work-place habits you can work on to help youself.

4. Don't be afraid of chaos

On average, buyside jobs are more stable than sellside jobs. Most people stay for a few years, and internal promotions to real money-management roles (PM) are common. However, if you happen to end up at a place with a high turn-over ratio, then don't worry too much about it either. For one, if you are junior, you can always transition to somewhere else with a better cultural fit for you after you learn the preliminary skills. And two, a high turn-over rate means that you get more people to observe and learn from. Much of investing is about how a person thinks, and the more senior people you can observe in the early stage of your career, the better. It generally takes about 6 months for analysts to understand their senior's style; some of them might fit you better than others, but it is always good to have the extra knowledge.

The only time when chaos is bad is when a person's own thinking is chaotic. If you are working for someone whose own thought process is chaotic, then be careful! You want to make sure that you are open-minded about their process, but at the same time, it's important to form good thinking habits when you are young, and a chaotic thought process might not be good for generating persistent returns.

5. Be brave in admitting that it may not be for you

I think this can often be one of the harder things to do in this line of work--not everyone is a great fit for this, and if you are not, then the earlier you acknolwedge it with yourself, the better it is for you.

Please note: there's a difference between finding a process difficult (esp. when one has just started), vs finding that this kind of job is not for you. The learning curve is steep for everyone in this industry, and you should expect it to be difficult to learn how to generate returns. When I say that something is not for you, it is from a personal/introspective angle--do you want to actually take risks, or would you rather do analysis? do you have the right personal makeup to take risks sensibly? Do you enjoy what you do? Can you see yoursel enjoying what your senior does?

I tend to think about these sort of jobs in the same way as I think about professional sports--for each winner, there's a loser; only very few can win, and winning takes a lot of sacrifice. I know everyone's heard of the investing wunderkind that has a great work life balance, is just smart as hell, and seems to be able to think about the market in a very smart way without having to work too much. However, that is not going to be the experience for most people, and you never know if that person just worked their butt off on their own. Either they are really talented, which one can not replicate if one isn't born that way already; or they've worked really hard during some phase of their career. If they didn't start out with more, then they've definitely put in more after they've started the process--or else, how can they end up with more? To think that one can easily pull off one of those jobs without any sacrifice is not very realistic--there are already more than enough people in the investing world, and everyone's pnl eventually add up to 0.

It's often hard for peopel who can make into this industry to admit that it might not be for them. After all, these people tend to be smart, talented, and have done well for themselves in school and in other jobs. However, given that this is a job that requires a high intensity and a high level of commitment, if you do not enjoy it (or if you are not very passionate about it), it's very difficult to last long. The longer you stay in one certain job, the more molded and less transferable you become. If there is something else that you might like better, don't hestiate to give that alternative a shot.

6. Do something you find interesting outside of work

This might sound cliched, but making your life outside of work interesting can make yourself last longer in your job as well. Everyone needs some diversion once in a while, and if you have an interesting hobby that you are committed to, you can often learn more about yourself through pursuing them, and build up some diversity in your life that can help you through tough time in the offie as well.

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Comments (13)

  • ChiSquare's picture

    Great post, thanks a lot!

    It's hip to be square!

  • HFer_wannabe's picture

    Good writeup, but disagree with the macro point (unless of course you're working at a pure-macro shop). You're most likely gonna be wasting time trying to fit investments into your macro-thesis, which itself is built upon a bunch of guess work.

  • In reply to HFer_wannabe
    Vagabond85's picture

    Disagree with this point that macro is a waste of time and agree with the OP. Pre financial crisis it was considered "dirty" for equity long short and other fundamental shops to tell people they thought about macro. The reality is unless you have permanent capital, you are at the mercy of your most recent returns and saying "we're a fundamental shop so the macro is out of our control" as the explanation for a drawdown ain't going to cut it. The notion the "macro is a bunch of guess work" and fundamental forecasting is akin to a scientific law is an over bandied about phrase for people who are afraid to think critically regarding risk and attempt to manage it. The reality is that both disciplines are very hard to do (that's why you get paid the big bucks). Newsflash- you don't make money investing by out-modeling the street to show 0.02 more EPS, but rather by determining what is consensus/priced in and taking a view versus that. For fundamental strategies this often has to do with corporate events, corporate strategy, but can also be macro related (interest rates for financial and real estate, fx for companies with lots of overseas operations, massive secular industry shifts). If you want to be a PM and taken seriously when you speak with them you have to incorporate this.

  • In reply to Vagabond85
    Anihilist's picture

    Definitely agree with this. When looking at long term prospects for a company, how can you not look at macro? The success/failure of a company is largely corollary to macro trends and environment (all else being equal).

    People demand freedom of speech as a compensation for freedom of thought which they seldom use.

  • In reply to Anihilist
    HFer_wannabe's picture

    Anihilist:

    Definitely agree with this. When looking at long term prospects for a company, how can you not look at macro? The success/failure of a company is largely corollary to macro trends and environment (all else being equal).

    So even after you do the analysis and determine something is undervalued, you may not buy something because you don't like the macro outlook?

    You can always make a case for a bullish/bearish economic cycle, as you can with equities. But with equities, the underlying fundamentals are much more tangible than a consortium of economic indicators from around the world. When something is cheap and your due diligence puts the odds of the company surviving and thriving in your favor, then you better fkin buy.

    There's obvious themes you need to be aware in the overall economy that will seriously fk up specific investments, but in terms of trying to spend lots of time on forming a huge, correlated macro picture is a waste in my mind.

    You can only control risk in what you invest in up to a point.

  • In reply to HFer_wannabe
    Anihilist's picture

    Absolutely. However, I don't believe all investments you'll make will be because something is undervalued. While I'm a little green myself to be making any kind of real investing conjecture, I think that sometimes taking a step back and looking at a company from a macro level is definitely beneficial (depending on your investment horizons).

    Looking at the actual macro sustainability of a company and sector is just as important as bottom-up analysis IMO.

    Say you find an undervalued O&G company (this is purely hypothetical though experiment), it may be a good investment; but how long are you willing to hold an O&G company? 5, 10, 20 years?

    People demand freedom of speech as a compensation for freedom of thought which they seldom use.

  • In reply to HFer_wannabe
    Going Concern's picture

    Some companies are very macro sensitive, others are not as much, so it really depends. If you want to strip out macro/broad-market effects you can put on a pairs trade with a comparable. Otherwise if you're investing in a lone company that is very sensitive to one or more macro variables and not doing any kind of hedging, then these variables should be playing a pivotal role in your overall thesis. For example, some company that's very sensitive to the price of some agricultural commodity isn't going to make you much money if that crop price goes way against you.

  • JrMistMaker's picture

    Chimp_and_jeez:

    6. Do something you find interesting outside of work

    This might sound cliched, but making your life outside of work interesting can make yourself last longer in your job as well. Everyone needs some diversion once in a while, and if you have an interesting hobby that you are committed to, you can often learn more about yourself through pursuing them, and build up some diversity in your life that can help you through tough time in the offie as well.

    This whole article was great but I wanna second this one in particular. For any industry/position its important to not have the only thing you immerse yourself in be work. It will help to keep you sane and prevent premature burn out, especially on those bad weeks. Personally, if I didn't have surfing/snowboarding I would have driven myself mad a long time ago. It is a great release to clear your mind of everything else. Works way better than a shrink too.

    I should note that it doesn't have to be physical, that just happens to be what I enjoy.

  • Lehman08's picture

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  • PeteMullersKeyboard's picture

    "When you stop striving for perfection, you might as well be dead."

  • ricyan's picture

    Progress is impossible without change...