When you consider financial career choices ranging from financial planning and portfolio management to corporate finance and trading, you should not be too afraid or too uninterested to consider using fixed income asset classes, or even consider them as your chosen field of expertise. Because fixed income securities have a broader range than stocks or funds, you can make yourself more marketable in the future and expand the net assets of the most important first job in this field. Read on and find out why working on a fixed income can be your ticket to the highest career goals you set for yourself.
See: Advanced Bond Concept
The benefits of bonds are often considered a "Haum" asset class, but there are many advantages to becoming an expert in the bond market, which makes the size of the stock market dwarf. These securities provide reliable and stable returns and form the backbone of the entire investment process. For you, this may be the right way to reach a broader base of customers or potential employers, while learning valuable skills such as how to diversify customer assets and reduce risk. Fixed income has not only meant bonds for centuries, but also innovation has been developing rapidly in recent decades. With the emergence of electronic trade and the intensification of financial market globalization, the boundaries of fixed income are very few. In addition to US Treasury bonds and foreign currency sovereign bonds, fixed income includes preferred stock, corporate bonds and municipal bonds.
See: How to Create Modern Fixed Income Portfolio
A completely different class of securities includes so-called structured finance. The group includes mortgage-backed securities (MBS), debt-backed bonds (CDOs) and many other acronyms for "full load" securities. Its basic cash flow is generated by all businesses, including automobiles, construction leases, bridges and toll stations.
Finally, there are many derivatives based on one or more of the above, such as credit default swaps, options and futures. According to the Bank for International Settlements, the value of global fixed income securities exceeded $70 trillion in 2007, exceeding the total market value of all global stocks.
What types of tasks to expect a fixed income job can handle any part of the research, trading, analysis, introduction or creation of the above securities. If you have the ambition to be a real asset manager, you need to choose personal bonds as comfortably as you would choose individual stocks or funds, whether for individual clients or mutual funds. The following jobs can give you a good start:
Research and trade search will involve finding fixed-income products to meet the needs of customers or employers, and will be highly analytical. You will get a set of parameters and expected risk levels, and use a wide range of fixed income knowledge to measure the benefits of potential investments.
These tasks are sometimes intertwined with the trader's task, which involves trading securities with multiple brokers. Transactions may occur in the open market (e.g. most Treasury bonds, corporate bonds and municipal bonds) or in private sales between companies, banks, brokers and insurance companies. Compared with stock trading, fixed income often involves more legal work and personal contacts due to liquidity restrictions and widespread market dispersion.
See: The Role of Traders and Investors in the Market
Portfolio management If you find your first job with portfolio managers (such as mutual funds or registered investment advisers), you will have the opportunity to learn some core concepts, such as bond rating for individual clients and credit quality research for specific bonds. Credit quality analysis provides risk exposure to stocks and fixed income; for example, to know whether corporate bonds are a reliable investment, you need to analyze the company's cash flow generation, interest coverage and long-term earnings clarity.
Portfolio managers can be found in mutual funds, private equity firms, hedge funds, pension funds and insurance companies, to name a few. Although you won't find a job managing a $1 billion fund right away, working under a portfolio manager will open a window for a broader understanding of the position of fixed income in a diversified portfolio.
Sales and brokerage
Sales and brokerage will involve selling fixed income securities to customers. You usually need permission to sell, and you may receive customized training from your employer on specific types of securities in their inventory. In order to succeed in brokerage, you need to understand more than just the model terms of bonds and structured financial products - you need to understand how the bond market works and the characteristics of various competitive or similar securities.
See: Entering the Broker Trading Procedure
Seller brokerage firms (such as Merrill Lynch and Morgan Stanley) employ a large number of salesmen for individual customers and institutional investors. Investment banking groups also use brokers to sell new debt problems to their clients, but these efforts require a higher level of experience and background.
Backstage and accounting have created many admirable career paths through various backstage functions, such as accounting, position and cash settlement and reporting. Some of these jobs may be easier to get directly from schools, but they still provide a window into how fixed income securities are priced, traded and valued, and their functions for investors. If you show genius and enthusiasm for the securities you are working on, you can get an opportunity to work in a position with more hands-on experience. Due to the general lack of interest in asset classes (especially young professionals), there are ample opportunities to work from the inside up.
Educational background and requirements In pursuit of the type of profession discussed here, the most reliable starting point is to obtain a university degree in accounting, business, economics or finance. Postgraduate degrees like MBA can offer obvious advantages in the early stages, but professional names like CFA or CFP can only be acquired after years of practical experience and are usually sponsored and/or funded by your employer (who are eager to flatter your higher education). Both CFA and CFP exams attach great importance to fixed income knowledge, so if you want this knowledge, you need to gain experience as soon as possible.
Look: Should you go back to business school?
Ideal skills for fixed-income professionals include:
- Strong analytical and mathematical minds
Fixed-income world has its own localization, it must learn and use, and because of the emphasis on electronic trading and analysis, there is a high level of technology in the field of high-level.
Open the door to opportunity. There are many advantages to taking a fixed income route. In addition to making itself more market value, in a weak market environment, fixed income is also a safe haven. Many stockbrokers are laid off when a bear market strikes, but fixed-income professionals can usually weather the storm. In fact, fixed income securities may flourish as investors turn to safer alternatives.
For anyone who wants to manage a large amount of assets or work for wealthy clients one day, it is necessary to master the basic principles of fixed income. You will gain the in-depth understanding you need to manage a diversified portfolio, especially for retirement age customers and the elderly. These customers hold disproportionate shares of fixed income securities because they provide security and predictable revenue. If you want to enter the baby boom generation, the experience of fixed income is the most reliable way.
For young professionals who want to keep their career path open and broad, they should consider gaining experience in fixed income products as soon as possible. You will be able to deepen your understanding of stocks and other asset classes, while gaining experience in the most widely held and stable asset classes. With so many different types of securities to choose from, you either decide to specialize in a fixed income area or use your time as a springboard to move into broader portfolio management and financial planning areas.