Why are Financial Analysts well paid?

Posted on February 27, 2019Categories Global finance   Leave a comment on Why are Financial Analysts well paid?

“Finance is not merely about making money. It’s about achieving our deep goals and protecting the fruits of our hard work.”

– Robert J. Shiller

Finance is one of the most competitive and the most rewarding industry of the world. It can be tough to enter the industry without the proper knowledge and skills, needed to excel here. One of the best ways to begin a career in finance is to aim for one which includes multiple disciplines at the same time. Maths, analytics, accountancy, economics etc,. – give you the ability to get a holistic view of the industry and your organization. This also gives you a better scope to earn better. Being a financial analyst is one of the most desired job profile for many youngsters. Financial analysts can work in both junior and senior capacities within a particular organization. An analyst’s role is quite indispensable in an organization.

Who is a Financial Analyst?

A financial analyst is a person who analyses all major financial statements at a micro or macro level to understand the financial health of a company and offer suitable suggestions. The major functions performed by a financial analyst include fundamental analysis, ratio analysis, financial modeling and valuation of a particular company. A financial analyst is also called an investment analyst/ an equity analyst/ a research analyst or a security analyst.

A financial analyst must always be aware of the current developments of the industry in which he/ she is specializing in. This helps in preparing financial models keeping historical data in mind, which is important while trying to predict the future economic conditions for any number of variables.

Employment wise, the outlook for the field of financial analyst is very good.

It has been predicted by the Bureau of Labor Statistics of the USA (BLS), that the financial analysts job vacancies are expected to grow by 15.5 percent between 2012 to 2022.

A financial analyst performs many roles and executes various responsibilities. Some specializations are credit analysts, investment analysts, budget analysts, rating analysts, security analysts, tax analysts, Wall Street analysts and mergers and acquisition specialists.

Financial Analyst jobs

  • Buy-side firms:

A majority of financial analysts work on buy-side firms. These firms are basically corporate or individual investors who invest in future returns. The risks are quite high and the investment decisions are only made by the final investors.

  • Sell-side firms:

A sell-side firm consists of corporates and individuals who are involved as facilitators for Buy-side entities. The risk is quite less and the corporates/ investors help each other in decision making.

  • Investment Banks:

These are some of the most well paid jobs of the World. The main objective of investment banks is to raise capital by issuing securities or underwriting them. They assess the current financial conditions and rely heavily on modeling and forecasting to make recommendations to investors. It is the duty of these analysts to advise their clients if a certain merger, acquisition or investment makes financial sense.

Salary of a Financial Analyst

The median salary of a financial analyst across all experience levels as of May 2017 was $ 84,300. In India, the average pay scale average is Rs. 353,991 annually, but it increases up to Rs.9 lakh per annum depending on the position and experience of the analyst.

In London, one can earn up to GBP 20,000 – 50,000 annually and in the US for the same profile, one can earn in a range of $ 35,000 to $ 80,000 annually.

Becoming a Financial Analyst

Just like anything else, it helps if you begin early, in order to build a lucrative career as a financial analyst. BSE Institute Limited, a 100% subsidiary of BSE India, helps you learn and excel in the subjects, needed to be a great Financial Analyst. With proper case studies, industry interactions, classroom trainings and the right corporate exporsure, one can easily begin their career as a Financial Analysts. Our 4-month GFMP program is perfect for all students who wish to begin their careers as financial analysts. One of the highlights of the course is the industry internships and placement assistance that is provided to help students begin their careers.

 

AI to host The World’s Most-Watched TV Show

Posted on February 19, 2019Categories Artificial Intelligence   Leave a comment on AI to host The World’s Most-Watched TV Show

Have you ever imagined your favorite TV show host to be a virtual copy? Imagine a virtual copy of Mr. Amitabh Bachchan hosting Kaun Banega Crorepati (KBC). How would it be?

Most of us have happy memories of watching television with our family when we were young. Television has become an inevitable part of modern culture. People depend on TV for entertainment, weather, news, education, culture, sports, and even music. It enables them to share cultural experiences with others.  

The world’s first artificial intelligence (AI) TV hosts will conduct this year’s China Central Television (CCTV) New Year’s Gala. ( The world’s most-watched TV broadcast.)

The total audience predicted to tune into the Chinese state broadcaster’s Spring Festival Gala is over one billion people all over the world. The four world famous human hosts of the show, Beining Sa, Xun Zhu, Bo Gao, and Yang Long will be accompanied by an “AI copy” of themselves which will be their very own digital twin.

This personal artificial intelligence was created by ObEN Inc and are being recognized as the first AI hosts. These systems are not just computer generated avatars, but these include machine learning, computer vision, natural language processing, and speech synthesis. This helps to rebuild the virtual copies of the celebrities from scratch.

“While the TV event will showcase the company’s technology to the largest TV audience in the world, the potential of personal AIs and PAIs are further still and could transform many areas of society.”

– said Mr. Nikhil Jain, CEO ObEN.

The company has also started working to create AI-powered doctors, nurses, teacher, and as well as highly famous celebrities.

What individuates ObEN’s AI-enabled avatars from other digital copies is that these avatars are able to talk and act like the people they represent and are powered by AI rather than actors or any prescriptive behavior routines. The beginning of the process of creating a virtual human being starts from visual data which allows the avatars to look like their subjects that are gathered from 3D scanners.

Neural net technology is built around deep learning principles and is used to take a recording of the subject’s voice as input data and personal data regarding the subject’s behaviors and actions. From that, it can recreate the speech patterns as well as aspects of their personality. It usually captures the voice data and the person speaking from a script. Then the AI learns the traits of your voice and can generate new content in your voice either talking or singing.

Not just in your native language but also it can able to create content in your voice in languages which you can’t even speak.

For example, I might record my data in English, but my personal AI can speak in Chinese, Japanese or Korean, says Jain.

Celebrity “digital twins” is seen as a hugely profitable case for the AI technology. As it has a huge market for new ways in which fans can interact with their heroes and role models. In some ways, it can be seen as a natural extension of the market for personalized greeting messages and endorsements offered by many famous figures in both Asian and Western markets. As well as watching them on television, PAIs will offer fans a chance to interact personally with their idols. ObEN has also built an interface using the WeChat messaging service that allows anyone to have a conversation with one of its artificial intelligence avatars. This digital celebrities can also be deployed in virtual reality (VR) and augmented reality (AR) environments, too.

Companies like ObEN are growing swiftly in the AI markets and as they grow they need more manpower to run their services smoothly. BSE Institute Limited (bsevarsity.com) helps one gain vital technical knowledge regarding Artificial Intelligence. A course on Introduction to Artificial Intelligence with this institute can help one become a part of this emerging technology in the workplace.

 

Capital Markets

Posted on February 19, 2019Categories Short term programmes   Leave a comment on Capital Markets

The term, “Capital Markets” is referred to as an activity that gathers funds from some organizations and makes it available for other organizations who are in need of funds. The most important function of such markets is to improve the efficiency of transactions so that an individual organization doesn’t need to analyze, create documentation and complete funds transfer.

As per the financial services industry, “Capital Markets” is referred to as financial companies involved mainly in private markets as compared to public ones. This refers to investment banks, private equity, and venture capital firms in contrast to public exchanges. So in this situation, “Capital Markets” are considered as initial public offerings of debt and equity supported by investment banks. In the USA, the main regulator of exchange is the Securities and Exchange Commission.

In comparison with public markets which is operated by a regulated exchange, “Capital Markets” can refer to equity markets in association to bond/debt/fixed income, money, derivatives and commodity market. Due to this Capital Markets are also known as equity, bond, debt, income markets.

Functioning of Capital Markets :

Stock and bond markets both are a part of capital markets. Every government or individual organization requires some capital funds to start and run its operations and to engage its longtime investments. So to raise this funds a company starts selling bonds & stocks in the name of the company.

When a company is in need for capital to finance its work and to enhance long time investments it conducts an initial public offering (IPO) thereby tapping the investing people to invest and therefore using the capital markets.

When the company and governments sell their securities, it is in primary markets and on the other hand when investors trade these securities in the exchanges it is called secondary markets. Thus both primary and secondary markets make up the capital markets.

Generally, companies utilize capital markets to raise their income for projects by issuing various stocks IPO, bonds and short-term money market securities. Individual investors who wish to earn interest or dividends on their savings can meet the companies who are looking to raise funds by issuing securities.

To explain how a corporate bond moves through the capital markets, Let take an example:

A is a company which needs to raise Rs. 1000. A Co. offers a 10-year bond on the bond market with a par value of Rs.1000. The bond is purchased by someone who is wishing to earn interest on the Rs. 1000 that they have available. A Co. receives the Rs.1000 in cash and the investor will receive a bond and the promise of repayment plus interest. And if the bondholder later decides he no longer wants the bond, he can now sell it to another investor in the marketplace.

Now let’s illustrate using stocks,

Suppose Reliance, decides to raise more funds by issuing ten new shares of stock for Rs. 100 per share. It offers these shares in the market and someone purchases all ten for Rs. 1000 total. This time, the investor will obtain stock certificates giving him the partial ownership of the company. The company gets the Rs. 1000 in funds they wish to raise.

So by this example above, if this investor wishes to no longer hold these stocks, he can now sell them to another investor in the stock market for the current market price. And if the company is having extra cash, it can buy the stock back as well.

Capital Markets in India :

The Capital Markets play an important role in the financial system of India as the share market of India has a considerable portion of the world economy. The main constituents in the Indian Capital Markets are :

1.Fund Raisers

2.Fund Providers

3.Intermediaries

4.Organization: Stock Exchanges

5.Market Regulators i.e the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Department of Company Affairs (DCA).

Conclusion :

Therefore, Capital Markets play an important role in controlling the financial markets. Due to the capital markets, the funds of the company keeps on rolling and reaches to the needy organizations. As said by investment expert Warren Buffet, “The most important quality for an investor is temperament, not intellect.”The world of markets can be difficult and hard. But if you do thorough research and keep your head on straight, your chances of long-term success gets more good.

To know more or if you wish to learn about capital markets, BSE Institute offers easy short time online courses on BSE Varsity for all the students who are interested about Capital Markets. This Institute’s course on Introduction to Capital Markets and Investment Banking helps one sharpen their investing skills and styles over time.

 

 

Top 5 Popular Derivatives

Posted on February 6, 2019Categories Short term programmes   Leave a comment on Top 5 Popular Derivatives

What do the smartest people in the world do? They identify and build multiple sources of income for themselves! Similarly, while investing, it makes sense to reduce your risks by increasing the number of investment options. Derivatives are financial instruments that derive their value from the underlying assets that they represent.

Understanding derivatives starts by understanding the concept of risk. Whether you buy essential products, own property, run a business or manage money for some investors, or if you are a Government employee, risk is all around you, 24/7. For some, risk stands between them and their progress. For others, risk is an opportunity to invest. If you have ever bought or sold any asset, you know that there is always a risk that the price of what you buy or sell today could change depending on the market conditions.

Investors use financial instruments such as Derivatives and Futures to hedge risks in the market. These risks can be financial liabilities, commodity prices, or some other unseen factors. Financially savvy companies or share market traders happily accept these risks and use various strategies to make profits out of risks.

Derivatives offer the investors a powerful way to participate in the price action of a particular underlying security. Investors who opt to trade in these financial instruments aspire to transfer certain risks associated with the underlying security to another party.

What is a Derivative?

A derivative is known as a financial security with a value that depends on an underlying asset or a group of assets. The derivative itself is considered as a contract between two or more parties and its price is determined by price variations in the underlying asset. The most common underlying assets are bonds, stocks, commodities, currencies and market indexes. These assets are purchased through a variety of brokerages.

Derivatives can be traded over-the-counter (OTC) or on an exchange. OTC derivatives constitute a greater proportion of derivatives traded and are not standardized. Derivatives traded on exchanges are standardized and are heavily regulated. OTC derivatives generally have greater counter-party risk than Standardized derivatives.

Top 5 popular Derivatives

  1. Options

Imagine you purchase 100 Nifty 50 futures for Rs 10,724 on January 10. The expiry date is January 31. Your total Investment was Rs 10,72,400. You pay the initial 10% margin of Rs 1,07,240. On Jan 31, you sell all these futures for a price of Rs 10,678.

So your loss is (10,72,400 – 10,67,800) X 100 = Rs 4,60,000.

In this situation your entire initial investment is (i.e. Rs 1,07,240) is lost. And additionally you need to pay Rs 3,52,760 (4,60,000 – 1,07,240).

2.Single Stock Futures

A single stock future (SSF) is contracted to transfer 100 shares of a specified stock on a designated expiration date. The SSF market price of the product is based on the price of the underlying security plus the carrying cost of the interest, and the fewer dividends paid over the term of the contract. For trading SSFs, one requires a lower margin than buying or selling the underlying security, often in the range of 20%, thereby giving investors more leverage.

For example, you purchase 100 TCS futures at a price at Rs 1,740/ share on January 15. The expiry date is January 31. Your total Investment is Rs 1,74,000. You first paid an initial margin of Rs. 17,400. On January 31, the price per share increases to Rs 1,800.

So you gain (1,800 – 1,740) X 100 = Rs 6,000.

  1. Warrants

A stock warrant permits the holder the right to buy a particular stock at a certain price at a pre-determined date.

If TCS issues bonds with warrants attached, each bondholder might get a Rs 1,000 face-value bond and the right to purchase 100 shares of TCS at Rs 20 per share for the next five years. Warrants generally permit the holder to purchase common stock of the issuer, but sometimes they allow the investor to buy the stock or bonds of another entity.

  1. Contract for Difference

A contract for difference (CFD) is an agreement between the buyer and the seller that requires the seller to pay the buyer, the spread between the current stock price and the value at the time of the contract if that price increases. Conversely, the buyer has to pay to the seller if the spread is negative, .i.e. the price falls. The CFD’s main purpose is to allow investors to speculate on price movement without having to own the underlying shares.

5.Index Return Swaps

It is an agreement between two parties to swap two sets of cash flows on pre-specified dates for an agreed number of years.

For example, if one party agrees to pay an interest payment which is usually at a fixed rate based on LIBOR and while the other party agrees to pay the total return on equity or an equity index. Investors try to seek a straightforward way to gain exposure to an asset class in a cost-efficient manner often by using these swaps.

Fund managers can buy into an entire index like the S&P 500, by picking up shares in each component and adjusting the portfolio whenever the index changes.

The equity index swap may give a less expensive alternative, allowing the manager to pay for the swap at a set interest rate while receiving the return for the contracted swap period. They’ll also receive capital gains and income distributions on a monthly basis while paying interest to the counter party at the agreed rate. In addition, these swaps may have tax advantages.

Derivatives also offer an effective method to spread or control risk, hedge against the unexpected events or to build high leverage for a speculative play.

To learn more about derivatives that can help you build multiple streams of income, doing a short term course on derivatives will surely help investors. BSE Institute Limited, a 100% subsidiary of BSE India, offers a short-term course on Advanced Derivatives Trading Strategies, on its online platform bsevarsity.com. One can gain an in-depth understanding of the market strategies used by experienced brokers and traders.

 

Mutual Funds: Double your income

Posted on February 6, 2019Categories Mutual Funds, Short term programmes   Leave a comment on Mutual Funds: Double your income

Some people may ace their tests, get great jobs and do everything else expected of an adult – but they still need hand-holding, when it comes to stock market investing.

One of the biggest mysteries for a lot of learned people across the ages – is the stock market. Many people have struggled to invest and get good returns, despite being regular investors and market followers. It is in this context that people struggle to understand the benefits of investing in Mutual Funds.

Understanding Mutual Funds has always been one of the biggest challenges faced by retail investors, despite the large amount of value that they have created in the last few decades.

Investing in mutual funds is very important for many investors in India. These funds have become quite popular as they diversify the risks by investing in multiple equities. Building and managing your own portfolio via mutual funds is one of the safest way to multiply your investments.

An investor first needs to be clear about the life and financial goals that he has in mind. By being clear about the targets he/ she has, one can easily make a clear road map for investing.

To invest, you need a diversified, asset-allocated portfolio. This allocation is based on your goal timeline, risk appetite, and other factors. This is, based on what you’re aiming for, .i.e. the equity-debt proportion which works best for you.

As markets move, your asset allocation proportion also changes. Your equity allocation could go up if markets rally for a long time, or it could go down when markets are correcting. Hence, you need to re-balance it to bring it back in line.

Building a mutual fund portfolio

Building a mutual fund portfolio is like building your house. Just like you choose designs, materials and other tools for your house, you need to choose and select every little detail for your portfolio. In order to maintain and build your own portfolio through mutual funds, you must have a plan along with a strong foundation of mutual funds which fits best according to your requirements.

First select a satellite portfolio design. A Satellite Portfolio Management is an investment strategy that incorporates traditional fixed-income and equity-based securities (index funds, passive mutual funds, etc). Next, focus on building a large capital stock fund which is the anchor of your portfolio with satellite funds at the periphery. The satellite funds form the smallest portion of the portfolio.

Other categories that can be included are fixed income funds, which includes bonds, sector funds, market funds, and small capital stocks. Before choosing your fund, you must have a strong idea about the amount of risk you can tolerate.

Lastly, you should be able to evaluate your asset allocation. Once you successfully evaluate your risk, you shall be able to evaluate your allocation of assets. These include the stocks, cash, bonds and other investment assets which are the part of your portfolio through mutual funds.

If your asset allocation is perfect, then your risk tolerance level is either aggressive; high-risk tolerance or moderate; medium risk tolerance.

Given that you have a broad range of mutual funds to choose from, you can simply get a fund screener to compare your performance and to a set a benchmark. More so, you would also want to evaluate crucial qualities of mutual funds like manager tenure and expenses incurred for the particular fund.

Additionally, a given mutual fund will definitely issue different classes of its shares to its investors. The most common variations of the share classes for load mutual funds are front-load A shares, back-end load B shares, and level-load C shares.

l Class A Shares: A mutual fund’s A Shares charge a front-end load at the time of purchase. This is a sales fee which is charged as a percentage of the total investment and is used to compensate the financial representative who sells the particular fund. The amount of the respective front-end load is then subtracted from the original investment.

l Class B Shares: B Shares are called back-end loads. When a particular investor purchases the B shares of a mutual fund, the sales charge is deferred until the fund is sold. This deferred load generally decreases each year. B shares charge a higher asset-based sales charge than the Class A Shares.

l Class C Shares: Class C shares generally do not impose a front-end load, but often charges a nominal fee if the shares are sold within one year. Class C shares often impose a high asset-based sales charge but do not convert to A shares when the load reverts to zero.

If you are just a beginner, you may not have enough knowledge or risk appetite to fulfill the minimum initial investment. In such a case, begin with low-cost large capital funds.

BSE Institute has successfully educated and trained lakhs of students and working professionals to invest in stock markets. It also has an online platform called BSE Varsity, which provides online short-term courses for anyone interested in learning more about stock market investing. A short-term course on Building wealth with Mutual Funds can help you learn more about mutual funds and growing your investment portfolio.

 

The Ultimate Guide to Financial Modeling

Posted on February 1, 2019Categories Short term programmes   Leave a comment on The Ultimate Guide to Financial Modeling

“Someone’s sitting in the shade today, because he planted a tree long ago”

– Warren Buffet

Any successful individual will highlight the importance of foresight and planning in their lives! Financial modeling is one of the most valued but thinly understood skills in the field of finance. A financial modeler combines accounting, finance, and business metrics to create an abstract representation of a company in Excel.

Financial models are made to analyze the current financial standing of an organization and to build a picture for the future.

Financial Modeling teaches one to work with historical data of companies, competitors and the industry and use this data to analyze the company performance on the basis of relevant financial parameters. This data lets the board of directors analyze the performance of the company viz a viz the competition and understand if they have performed well and are in line for robust growth.

It is on the basis of these models that a management/ CEO/ MD is able to predict and announce the future financial performance. This gives investors an estimate of the valuation of companies and lets them decide whether they must invest or stay away from the stock.

What is Financial Modeling?

Financial Modeling is considered as the process in which a firm constructs a financial representation of some or all aspects of the firm or an underlying asset. The model is built by computing calculations. It also makes recommendations based on the computed data it receives. The model can also summarize particular events for the end user such as investment management returns. It also helps in understanding market direction, ex: Fed model.

The main aim for an analyst is to provide an accurate price forecast or future earning performance of a particular company. Financial analysts test numerous valuations and forecast theories by recreating all the business events in an interactive calendar called the Financial Model. A financial model always tries to capture all the variables in a particular event. It then quantifies the variables and creates formulas around these variables. The main software tool used for this is the excel spreadsheet. Spreadsheet language permits the financial modeler to reconstruct almost any cash flow or revenue system.

Uses of Financial Modeling:

Financial Models are used for different reasons. The most common are:

– business valuation,

– cost of capital calculations for corporate finance projects,

– scenario preparation for strategic planning,

– capital budgeting decisions and

– the allocation of corporate resources.

They are also used in the creation of trends and projections of forecasts and many other uses in relation to industry comparisons, ratio analysis and common size financial statements.

Example of Financial Modeling:

There are countless variables at play while building a forecast or a valuation.

Analysts can separate the most sensitive of these variables by creating models and then test the models with different inputs. The inputs are then used for creating a set of results that determine the impact of a change in one variable or another. The top financial models are very simple and provide their users with a set of basic assumptions.

Let’s take a case study of a company, Illinois Tool Works, which is an industrial manufacturing company. We’re given a set of assumptions here and we have to calculate the sales growth of the company.

Sales growth is a function of current sales and the prior quarter sales. These are the only two inputs a financial model needs to calculate the sales growth. The financial modeler now creates one input cell for the prior year’s sales, cell X, and one input cell for the current year sales, cell Y. In the third cell, cell Z, the analyst creates a formula that divides the difference between cell X and Y by cell X. This is called the growth formula. Cell Z is a formula and is hard-coded into the model. Cells X and Y are now considered as input cells for the user.

The main purpose of the model is to automate the calculation of sales growth for a particular company.    

Financial Models are generally built using excel, as it is very easy to use. Personal preference and needs dictate the difficulty of the spreadsheet. The key to understanding whatever data you do decide to include so that one is able to gain insight from it.

BSE Institute Limited provides a short-term online course on the Introduction to Financial Modeling using Excel on bsevarsity.com. This short course is best for working professionals who wish to learn about modeling in a short period of time, while they work. As this course is based primarily on MS Excel, professionals can easily implement all their learnings on their job immediately.