Did you know that the average investment banker makes more than eighty thousand dollars a year? And that’s before any bonuses that they receive.
Not only is it possible to make a big difference in the world as an investment banker, but you can also make a lot of money. Unfortunately, many people choose not to pursue these types of careers because they don’t understand what is investment banking.
To help you make sense of what it’s all about, we’ve created this guide. If you want to learn more, read on and we’ll tell you what’s important to know.
What Investment Banks Do
Most people have no idea what investment bankers do. They know that it’s an important career, but they aren’t certain why this is.
It’s incorrect to think that investment banking is all about greedy people in business suits who think about nothing else except their next investment opportunity. This is because more and more people are choosing to take ownership of their own financial futures by making investments in assets that will increase in value.
In most situations, this involves developing relationships with investment bankers. While traditional banks mainly take deposits and lend money to people and companies, investment banks sell securities.
It’s common for investment banks to invest the profits from these securities into big projects that traditional banks might consider to be too much of a risk. Here are some of the most common kinds of projects that investment banks tend to get involved in.
Offering Finances for Big Projects
Many investment banks invest their money in large infrastructure projects such as building roads and bridges. These kinds of projects need huge amounts of money to complete. Investment banks invest money into these projects with the belief that they will generate revenue once they’re completed.
Investing in Companies
It’s common for young companies to seek help from investors. Even though many company owners invest their own money to start their companies, this isn’t usually enough. This is why they often choose to create an initial public offering (IPO).
The basic idea behind an IPO is for a business to sell itself to the public. It’s the job of investment bankers to find investors who want to buy securities from these companies.
Mergers or Aquisitions
When it’s in a certain company’s interest to acquire or merge with another company, they seek help from investment bankers to seal the deal. Investment bankers often provide companies with the financing they need to acquire or merge with other companies.
Managing Assets and Offering Brokerage Services
One of the fundamental goals of investment bankers is to make investments in areas where it’s likely to bring returns. They often do this by acquiring clients who trust their investment bankers to manage their money. Investment bankers do this by choosing individual stocks or by finding mutual funds.
The Demographics of Investment Banking
Just like other forms of banking, the investment banking industry is dominated by white men. Less than twenty per cent of members of boards of directors are minorities. Less than thirty per cent are women.
Most people who work as investment bankers know that this is an issue. This is why it’s becoming more common for banks to create diversity programs. The aim of these programs is to seek-out qualified women and minorities to work for their companies.
How to Get Your Start as an Investment Banker
Since it’s important for investment bankers to know how to make deals, they need to know how to sell themselves. This means that you need to know how to convince people to hire you if you want to become an investment banker.
At the very least, it’s essential that you have a bachelor’s degree in business or economics from a respected school. Most investment bankers also have advanced degrees in business and mathematics.
It’s also important to be a good networker if you want to become an investment banker. Most people get started by becoming interns at reputable firms.
What Are the Best Investment Banks?
The biggest investment banks are JPMorgan, Barclays Bank plc, Goldman Sachs, Citigroup, Morgan Stanley, Deutsche Bank, and UBS. There are also hundreds of smaller investment banks that do business in countries around the world.
Most of the largest investment banks generate revenues of more than a billion dollars. Clients of the largest investment banks include retail companies, hedge fund managers, and governments. People with pension funds or who have investments also indirectly do business with investment banks.
The Difference Between Investment Banks and Retail Banks
Retail banks usually work with individuals by taking in their deposits. In exchange for putting your money into a bank, these people accrue interest on their savings. Retail banks also lend money to people who need to do things such as buy a new house.
Investment banks work mainly with large companies that need lots of capital. If you run a start-up or a small business, chances are that you’ll do business with commercial banks rather than with investment banks.
In most situations, investment banks do not do business with individual clients. They are more likely to invest in large companies and projects.
What Is Investment Banking: A Multi-Billion Dollar Industry
If you’ve been wondering “what is investment banking?” it’s important to understand how different investment banks are from retail banks. While most retail banks do business with individual clients, the majority of investment banks invest in large projects and corporations.
If you found this article helpful, don’t forget to check out the other informative articles that we’ve included in our Banking dropdown. Regardless of whether you own a business or are an individual investor, we have many helpful resources.