What does a financial analyst do? Analyze finance. Duh.
Ok, so after all that analyzing of financial data, what does the analyst then do?
Well, she makes recommendations to, uh...do stuff. Generally so that investors can make money. Or not lose money. And to be clear, financial analysts comes in a few different flavors.
Take an analyst who works for a stock brokerage, for example.They'd produce reports, which the brokerage then gives to clients, hoping that it will incentivize them to trade with the firm and give the firm its commission/trading business, which, of course, generates commission dough for the brokers.
In theory, the goal here is to make money for the client, but the more near-term goal is to get the client to pay attention to the firm. This is a subtle but very important difference from a financial analyst who works for an investment company, i.e. one who actually invests money for clients, and is evaluated based on the performance of those investments.
A financial analyst inside of an investment company, like Fidelity or Franklin or 20th Century or American Funds, cares only about how well the investment does. That financial analyst doesn’t have to juggle clients or worry about marketing to non-professional investors or generating commissions for the firm. All they have to worry about is beating the market or their index or whatever benchmarks are set out there for them.
In addition, there are two flavors of financial analysts on Wall Street, more or less:
Sell side...i.e. extensions of stock brokers. Sell side analysts are the "brains" hired by stockbrokers to market how smart that given firm is.
And buy side...i.e. money managers for mutual, hedge, venture, and private equity funds. Their job and evaluation revolves around how well or poorly the investment firm's portfolio managers...invest.
And then there are financial analysts who work for the government. These guys are usually housed in the hell-like division of the government called The Fed (hi, Fed, we love you ) which assesses whether or not the economy is heating up…cooling down...or see-sawing like a spring day in Chicago. See: Federal Funds Rate. See: Inflation.
Here, a financial analyst might be sampling the prices of a half-gallon carton of GMO milk at 500 grocery stores around the country. They then use that data to figure out if the country is feeling inflation...deflation...or just boredom.
Financial analysts exist inside of corporations as well.
Corporate analysts perform market evaluations to try to help companies sell more product for more profit, which in turn fuels the company's growth, and all that other fun stuff. See the Shmoop Wall Street Careers area for more details and/or love.
Related or Semi-related Video
Finance: What is Technical Analysis?12 Views
Finance a la shmoop what is technical analysis okay we have fundamental [Fundamental analyst sat at a desk]
analysts who look at what the company does for a living how hard its products
are to manufacture how much they sell for how big global demand is how [Fundemental analyst check list]
powerful their brand is what their profit margins are in their growth
prospects from there how their balance sheet looks you know stuff like that
technical analysts don't care at all about any of that stuff those are
fundamental elements of a company technical analyst view stocks only as [Technical analyst chucks the list away]
trading sardines and really couldn't care less how the companies they are [Sardines with company logos on]
trading actually make money or run their businesses technical analysts follow
stock charts with influence from all kinds of shapes made by recent [Examples of shapes on a blackboard]
historical prices on a graph made by these stocks like you have a triple top
here right like so there's a hard line is trying to break out of that line line [Top line is highlighted]
says nook smacking you back down they can't break out so it's triple top and a [Hand smacks the price back down]
lot of gravity there so no maybe I'm short that stock at the end of that
triple top all right then you have the dome yeah it just kind of goes up but it
doesn't really want to break up so it's kind of trading down and then what do I
do with the stock here I don't know I don't know then you have descending tops [End of the dome is highlighted]
where Oh tried to break out oh but now it's a lower low because they miss their
earnings ah now it's a lower low and again they missed so the stocks going [Trend line showing the price going down]
nowhere it's pretty depressing around here then you have a saucer notably
shaped like a smiley face yeah you can see the two eyeballs there so you want [Smiley emoji appears]
to be long that stock somewhere in the middle there because
then it goes up and does better and yeah life's good and color and dimension gets
added to the stock charts via other technical things like volumes of shares [Colorful 3d stock chart]
traded in a given week or day or month if you're having a mini deja vu well it
might be because you just saw our M night Shyamalan dingdong
directed video directly cleverly called what is a Chartist and while they're [Girl working behind a computer]
basically the same thing technical analyst and chart us you know
same foot so yeah fundamental analyst concerned with nuts and bolts of the
operations of a business technical analyst concerned with pretty little [Descriptions of each analyst shown next to them]
drawings of the nuts and bolts reflection on a graph and interpreting
what that all means a kind of like staring at you know animal problems in [Looking at dung through a magnifying glass]
the jungle mental health analyst well I had to get a lot of these guys in their
office sorry different kind of therapy [Both the analysts at a therapist]
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