Investment banks provide assistance for, arrange, price and finance mergers and acquisitions as well as designing financial instruments tailored specifically to issuers and investors’ individual requirements.

Financial modeling courses and various techniques and tools, such as the Glass-Steagall Act which defined investment banking from commercial (deposit-taking and loan-making) banks back in 1933 are used by investment banking professionals.

Definition

Investment banks raise funds through selling’securities’ (shares and bonds) to investors. They analyse a variety of factors, such as earnings potential for each company they represent, to ascertain its share price. Furthermore, investment banks often assist clients with mergers and acquisitions processes.

These firms often charge fees for their services and take on considerable risks; should an overvalued stock be sold back at a discounted price than when initially bought, for instance.

Banks are a vital component of the financial market and an indispensable part of an effective economy, serving as sources of capital for companies and governments, while offering advice on where best to invest their funds. Their work is highly regulated, demanding math skills and Excel proficiency for optimal results. Banks typically offer industry coverage groups or product groups dedicated to specific products like IPOs, M&A or financing deals that they specialize in.

Functions

Investment banks provide more than capital; they act as mediators between security issuers and investors. For example, they purchase all shares offered in a public offering at prices determined by their experts before selling them back out into circulation at a profit to individual shareholders – taking a commission fee for every share sold to the general public.

Additionally, they advise corporations and businesses in mergers and acquisitions by providing advice as to the value of a business. Furthermore, they help find investors for debt offerings or “securitize” income streams such as mortgages or credit card receivables into fixed-income products that can be sold off to investors.

Front office functions involve client engagement while back office processes don’t directly generate revenue. Examples of such functions are market risk management, credit risk assessment and internal corporate strategy groups which analyze risks taken on by investment banks during capital market activities as well as control trading and sales operations.

Qualifications

Becoming an investment banker involves combining education, on-the-job experience and professional growth. Start off as an entry-level finance associate or analyst to gain work history; earning an advanced degree such as an MBA can further your prospects in this career field; strong analytical abilities are a must here as are proficiency with financial modeling and valuation techniques.

Though you can enter the investment banking industry with any bachelor’s degree, most professionals pursuing careers in investment banking seek degrees in finance, economics, accounting, business or math. Attending an acclaimed university may give an edge when competing for jobs on Wall Street; additionally qualifications include strong communication and interpersonal skills as well as the ability to handle fast-paced environments with long hours. Many investment banks divide their staff into working groups that specialize in certain industries or market sectors.

Salary

Investment banking’s primary function is raising funds by selling securities such as stocks and bonds to high-net-worth individuals, pension funds, or companies looking for funding of large projects. Once raised, funds can then be used for purchasing products, expanding into new markets or making acquisitions.

Investment bankers typically receive a base salary plus performance-related bonus; usually an agreed upon percentage of any commissions generated (i.e. every time a transaction closes, the bank earns a fee).

However, investment banking may not be for everyone; it requires hard work, perseverance and an indomitable spirit if one wishes to succeed at this highly-competitive field. Without these essential traits in place, chances are it won’t be worthwhile in the end.