Buyside Research Worth it?
Like many of you, I love investing. There are few things I enjoy more than researching an individual security and being right. Therefore, I thought buyside research was the ideal career.
However, thinking about it now, you never to get to personally reap the benefits of your research. Sure if you find a security and generate alpha for the firm, you might get a little extra bonus, but that is your job so it is almost expected. With compliance and trade restrictions, you can’t also purchase the same securities in any personal accounts.
I guess the solution to this would be to get equity in the business, but that is extremely rare. Wouldn’t it be better to get a different job with a decent salary and just invest in PA to actually receive the financial benefit of your research?
Fair point, but you don't have enough assets.
In your PA, let's just say you have $100k in savings, you can compound that at a 30% rate for 10 years (which, if you ask most buy-siders, very impressive track record), your PA goes to $1.4 million, which is nice. You got to keep all the returns, fine.
But if you can work at an investment firm, yes you just get a cut of firm's performance, but the firm can be managing billions, if the firm as a whole can compound at the same rate, without going into the math, your reward is still way higher even if your bonus is say 1% of the return, and not to mention you can invest your reward based on your own research as long as you comply with firm trading policy.
The buyside option is superior in every way - you get paid more money, do what you love, become a better investor, and you're not precluded from personal investing (at least at most firms). Maybe you can't invest in the same names you're recommending for work, but you can do work on the side for your PA whenever you want (which is exactly what it would be in the alternative career option).
I'll also add the fact the buyside research when you're at a large fund is much more interesting (in my view) because of the access you can get to management, the company and other research. If I want to look at a company in detail, I can get a dozen reports instantly and get the consensus view and any risks/opportunities flagged by sell-side. I can then meet management and/or visit the company, see their products and maybe talk to their clients. I also have access to industry experts who can give me even more insight. I would get bored just shifting through news and 10-Ks.
"However, thinking about it now, you never to get to personally reap the benefits of your research. Sure if you find a security and generate alpha for the firm, you might get a little extra bonus, but that is your job so it is almost expected." -OP
HUH? You think all analysts on the buyside receive the same compensation or something? Also, if you truly "love" investing I don't know how you could possibly consider not working in the business.
Go try to become the best buyside analyst you can- fortunately the compensation should be competitive enough for the first few years that you should try to forget about that and your PA and think about learning the skills and gaining the experiences to set yourself up long term.
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