Investor Salary Guide

Comprehensive guide to investment industry compensation

Author: Anthony Kibwe
Anthony Kibwe
Anthony Kibwe
I graduated with a bachelor's degree in Economics at Carleton University and moved on to work as an administrative assistant. After working at this job for a year, I started to work for Scotiabank and then started this internship. After completing this internship I started working for Scotiabank again.
Reviewed By: Patrick Curtis
Patrick Curtis
Patrick Curtis
Private Equity | Investment Banking

Prior to becoming our CEO & Founder at Wall Street Oasis, Patrick spent three years as a Private Equity Associate for Tailwind Capital in New York and two years as an Investment Banking Analyst at Rothschild.

Patrick has an MBA in Entrepreneurial Management from The Wharton School and a BA in Economics from Williams College.

Last Updated:November 27, 2023

Investors use capital to invest in the hope that they will receive financial returns. In addition, investments occur for future products and services such as new housing, infrastructure, and other goods and services. 

Investors play a significant role in the economy by making investments to help promote economic growth. However, investors use several financial tools to help achieve this, and using these tools requires expenditure.

Investor's income comes into play since investments cost money, meaning that investors need to watch their income and how they spend it. An investor's salary is also essential and determines how much income investors receive from their job.

There are various reasons why investments occur in the economy, with one being that investments help to create wealth shared between the investor and the economy. Saving money alone is not enough to raise income which is why people invest, knowing that it carries a risk.

Key Takeaways

  • Investors are responsible for their investment in the economy.
  • Mutual funds are the main tool used for investment.
  • Salary and income play a major role in investment decisions.
  • Investment returns are never 100 percent guaranteed.
  • Investors are attracted to a business that receives good reviews.

Risks of Investing

One risk of investment is losing a considerable amount of money if one makes a bad investment. One example is if a scammer makes an investment offer that seems tempting at first glance but tricks customers into wasting their money and getting nothing in return.

One way to avoid this is to notice the red flags of investments:

  • Sounds too good to be true.
  • States how everyone is buying it.
  • State financial adviser gets a huge boost in income from the investment.

Investors must also be careful about choosing legitimate investments, which carry serious risks because mistakes made with these investments could severely hurt the investor and their business. Businesses can suffer if their investor's investment goes wrong and strains their budget supply.

Choices made by investors are essential as their decisions could either benefit or harm the economy. There are several tools investors need to use to make the correct choices that will not harm themselves or the economy itself. 

NOTE

Investors use tools such as stocks, bonds, mutual funds, and real estate to achieve what they want in their investments.

Investment Process

Several ways are available to choose from or to start with to begin an investment, one being real estate.

  1. Real estate is what people invest in when they want to purchase new housing, such as an apartment, condo, or house. 
    • Tangible assets like real estate provide a preferable choice for investments for investors.
    • Investing in real estate requires a lot of research, for instance, what kind of housing the investor wants. The price of new housing is also considered when investors decide what to purchase. 
    • The location is important depending on the customer's preference and how convenient it is for them.
    • The payment for new housing is high, which is why investing occurs, and individuals invest in stock for the possibility of getting high levels of returns from the stock. 
  2. Investing in stock allows one to have an advantage in their investment planning and requires good judgment, as stock investments have risks.
    • One risk is the possibility of the stock getting a decrease in its value over time, leading to making a bad investment as a result. For this reason, careful planning and knowledge are necessary when deciding what to invest in.
  3. Another venture people participate in bonds, which are loans investors offer to companies with the expectation of receiving higher payments for those loans. 
    • Bonds benefit from providing solid income; however, the risk of inflation bonds will offer back less income to the investor.

Types of Investors

There are various types of investors in the economy, and each has its investment approach. Motive differs between each type of investor, and each has its reason for investing to achieve its objective. 

Investors differ because of their varying risk tolerance, where some investors are willing to take bigger risks than others.

One type of investor is a passive investor who keeps buying and selling to a minimum to maximize their returns. They differ from other types of investors, i.e., active investors, who invest based on an analysis of financial ratios and statements

The difference here is how active investors buy and sell depending on the analysis and only sometimes invest at the minimum.

Emotion plays a role in investors' decisions which is the case for retail investors, where emotion determines how much they invest. If these investors get greedy, they will want to purchase more stock than usual and are independent as they invest in assets independently.

Investors check their salaries to ensure how much income they will have in the future to invest in assets such as real estate, which is what institutional investors do. 

They differ from retail investors as they purchase stock in insurance companies and not in publicly traded companies that retail investors invest in.

There is more way these two types of investors differ from each other:

  • Institutional investors have access to more resources than retail investors.
  • Retail investors must make the decision themselves, while institutional investors don't.
  • Institutional investors are the first to look at the investment structures and products currently offered.

Investor Salaries

The salary for an investor can vary widely and is typically based on the investor's assets under management (AUM), technical certifications, career length, and ability to generate returns in excess of the benchmark.

  1. Retail Investors:
    • Retail investors are individuals who invest for their own profit using their personal funds. These investors do not receive a salary in excess of their returns and are somewhat limited in the types of investments available to them.
  2. Financial Analysts:
    • Entry-level financial analysts, including those specializing in investment analysis, can start with salaries ranging from $50,000 to $70,000. With more experience and advanced degrees (like the CFA charter), salaries can progress to $100,000 or more.
  3. Private Equity Analysts:
    • Private equity analysts can start with salaries between $80,000 and $120,000, and as they gain experience, they may earn bonuses that significantly increase their total compensation. These investors may benefit from extensive experience in the industry, and may conduct initial public offerings (IPOs) for private companies.
  4. Hedge Fund Analysts:
    • Hedge fund analysts often earn higher salaries compared to other investment roles. Entry-level salaries might start around $100,000 to $150,000, with significant bonuses tied to performance. Hedge fund analysts are expected to understand the more technical aspects of trading such as hedging investments using options and swaps.
  5. Portfolio Managers:
    • Portfolio managers, depending on their experience and the size of the portfolio they manage, can earn salaries ranging from $100,000 to several hundred thousand dollars. A significant portion of their compensation often comes from performance-based bonuses. It can take many years of experience in the investment realm to become a portfolio manager.
  6. Investment Bankers:
    • Investment bankers involved in mergers and acquisitions (M&A) or corporate finance might start with salaries between $100,000 and $150,000. Progression in the industry typically involves moving into private equity or other roles where their compensation can increase significantly.
  7. Venture Capitalists:
    • Compensation for venture capitalists varies widely. Associate-level positions might start with salaries similar to those of investment bankers, while experienced partners can earn substantial salaries, often supplemented with a shart of profits from successful investments.
  8. Real Estate Investors:
    • Real estate investors, whether working for a firm or independently, can have diverse earnings. Entry-level salaries might range from $60,000 to $100,000, but successful real estate investors can achieve significant wealth through property appreciation and rental incomes.

Mutual Funds

Mutual funds are what investors acquire to invest, whether for stocks, bonds, or other assets. Mutual funds have a major role in the investment process as it is at the center of investment. 

Mutual funds must be managed for the investment to happen smoothly.

The investors collect mutual funds and send them to their fund manager, who invests in the wanted assets. Assets create returns for investors who profit from them, leading to economic growth.

There are various types of mutual funds, these include:

Starting with money market funds used to invest in short-term securities. This form of investment is safer; however, the trade-off is that the potential return is lower, which means the investor gets less profit in the future using this fund.

Fixed-income funds are used to get a fixed rate of return from an investment. Investors use this form of mutual fund to get returns through interest which means that investors will not get a decline in the returns using this mutual fund.

Equity funds invest in stocks, and several kinds of equity funds invest in a variety of stocks or even several types of stocks simultaneously.

Balanced funds are used to invest in a combination of equity and fixed-income assets to get higher returns and diminish the risks of making a good investment.

Index funds track the performance of a certain index that managers prefer to use due to lower management costs and reduced research required.

Finally, specialty funds are used for a part of the market that focuses on goods and services such as energy and healthcare.

Pros and Cons of Mutual Funds

Mutual funds have their advantages and disadvantages.

The advantages of mutual funds are:

  • Mutual funds are managed professionally.
  • They permit diversity in investments.
  • They have high liquidity levels, meaning they can purchase or sell quickly.

The disadvantages of mutual funds are:

  • Costs for mutual funds are high.
  • Investors do not control mutual funds as they are managed by someone else.
  • There is no guarantee that mutual funds and the returns could end up being less than expected.

Investors observe their salary to decide what course of action they will take, such as using which type of mutual fund to use and what kind of investment they want to make.

Another important factor that affects investors' decisions is their risk tolerance, which measures how much risk an individual is willing to accept when they invest. 

Risk tolerance also helps to determine which mutual funds investors are willing to use and what kind of investments they will make. It has several forms, one being aggressive risk tolerance with the highest risk tolerance.

NOTE

An investor is willing to risk losing money to get better returns. 

They understand the risks and use strategies to obtain higher returns from their investment.

Moderate risk tolerance is another form where one wants to gain money but wants to avoid losing a large sum in the process. These investors use balanced funds as those funds use a ratio that is preferable to them.

Conservative risk tolerance is the last version of risk tolerance, where investors prefer more guaranteed returns and are least willing to take major investment risks. Examples of these individuals include people who are retired or planning to retire soon.

Methods of Investors

Small businesses can grow with the help of investors through several means, with one being mentorship by guiding others. 

They guide others by teaching them how to make profits and not to receive more loss than gain in an investment. The knowledge investors will enable businesses to achieve further success.

Networking is another way investors aid in the growth of small businesses, as they can meet with other intelligent individuals to help improve the business. 

Connections are created, which leads to small businesses getting advertised as more people will know about them and, as a result, attract more customers.

Recruiting is another method investors use to help the business, as an increase in employment can promote economic growth. 

Investors can search for people with experience and skills that would ultimately allow the business to grow even more as the workforce of small businesses will have more skilled employees working for them.

Salary comes into play in recruitment as the question about a job seeker's salary expectation is also a factor when determining who will get selected for the job. Therefore, the wage rate will attract job seekers to these small businesses if the wage rate is high enough.

Screen questions are asked to determine who will or will not be a good fit so investors can focus on the ones with the qualifications. Many steps in the recruitment process must be taken to find the right candidates for the jobs these businesses offer.

Investor Attractions

Investors are attracted by various means, one being networking, where the greater someone's network is, the more people will know about them and want to contact them. 

Connecting with more people will eventually lead to meeting some investors, and after interacting with them, they can open the door to potential job opportunities.

A local business that produces good results, such as more customers and considerable profit, would attract investors into connecting with them. In addition, investors will allow small businesses to have a wider variety of strategies to improve their business.

Advice is another way to attract investors, as reaching out for advice is a good way to create connections with investors. After they offer their advice, strong relationships can be formed over time, allowing investors to be more willing to invest in your business.

Investments with high rates of returns will give investors an incentive to approach a business since there is the possibility of receiving more profit. A reason must be given for what investors will gain in return for investing in this business.

Good reviews about a business are another method for bringing in investors to allow for growth and expanding one's network. Individuals who see the reviews a business is getting would want to come to the business to learn from it or provide any assistance they have to offer.

Researched & authored by Anthony Kibwe | LinkedIn

Reviewed & edited by Justin Prager-Shulga LinkedIn

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