One of the most challenging careers, which tests a man's character, financial acumen and his inner mettle to the core, is the job of a fund manager. Hundreds of people invest their money in mutual funds, looking at the mutual fund manager's past performance and track record. In a way, those people bet their life savings on the judgment of one person. This fact should give you an idea about the kind of experience and expertise that's required to become a mutual fund manager.
The path to becoming a WallStreet rock star is a tough one. Expert managers, that are legends in their own right today, like Benjamin Graham and Peter Lynch, have generated consistently high profits for their investors, by profiting from stock market folly, rather than participating in it.
Mutual Fund Manager Job Description
As a manager of a mutual fund, you are responsible for making all the investment decisions on behalf off the investors. Mutual funds put the combined money pool of the investors into diverse range of securities like stocks, bonds and other money market investment vehicles. The mutual fund management team earns through commissions paid by the investors, along with a percentage of profits made by the fund. The salary is dependent on the size of assets under his management and the performance of investments initiated by him.
In cooperation with other managers of the team that are working in equivalent or subservient capacity, an investment manager must decide where to invest money. Market research, analysis of investment options, regularly monitoring the performance of existing investments, changing investing strategy according to market movements and studying industrial sectors for investment opportunities are some of the tasks, which a mutual fund manager must carry out.
Considering the amount of number crunching and market analysis, a manager must engage in, he has to well versed in accounting, economics and market research.
How to Become a Mutual Fund Manager?
Considering the highly specialized nature of the job, mutual fund managers need to have the financial expertise to make sense of the data that keeps pouring in and make decisions based on core study of investment sectors. Here is an outline of the absolute essentials.
Get an Undergraduate Degree in Economics
To be able to analyze financial markets, a good grounding in the fundamentals of economics and accounting is essential. Ergo, it would be ideal to get an undergraduate degree in economics with a specialization in applied mathematics and finance. This education will stand in good stead later, when you go for advanced finance courses.
Go For an MBA Degree in Finance
Aim for an MBA in any one of the Ivy League schools like Harvard, where you can find the best brains in economics as teachers and guides. An MBA degree in finance is preferable, as it will equip you with all the skills that you need to analyze the markets and ground you well in fundamentals of financial analysis.
Get Certified as a Certified Financial Analyst (CFA)
Getting a master's degree in finance is not enough. It's necessary that you be recognized as a 'Certified Financial Analyst (CFA)'. The CFA institute, based in Charlottesville, Virginia conducts a series of three exams which test your mathematical acumen, statistical analysis skills, knowledge of economics, corporate finance, financial analysis, portfolio management and most importantly your ability to effectively analyze securities. On passing a series of three rigorous exams, with the CFA certification in hand, the doors of major investment firms will be opened to you.
Apply for Internships and Trainee Job Positions with Investment Firms
Most mutual fund managers start out as trainees and junior analysts with top investment firms. In these early days, analysts assist senior managers and get hands on training. They get extensive experience of how real world investment decisions are made through thorough research and analysis. After their training period is over, analysts are given bigger responsibilities.
Here is where the real education of an individual who may later become a fund manager, actually begins. Some are fortunate to find great mentors who can guide them through the maze of the investment field. Here is where they must apply the skills of financial analysis, which they have mastered, to make choices based on pure logic, without letting emotions corrode their decisions.
Rise in Ranks by Proving Yourself
It's necessary that you gain extensive experience in an investment firm, before you can even be considered for the top job of a mutual fund manager. In corporate environment, your work speaks for itself and successfully handling your assigned jobs, will ensure that greater responsibility will gravitate towards you automatically, making you rise in ranks. A deep study of the range of investing options from low risk investments like treasury bonds to high risk alternatives like derivatives is a must. You must understand how a market reacts to different financial conditions.
Start Your Own Mutual Fund or Investment Firm
After you have gained substantial experience in the field for more than 10 years, with a proven track record, your firm may choose you to give you the top job of a mutual fund manager. Otherwise, like most big shot fund managers, if you are confident enough and have a group of investors backing you, the best option is to open your own mutual fund or investment firm. Consistent performance is the only thing that can bring you investors. Some managers prefer to work with big investment firms, while some prefer this more ambitious paths of starting their own concerns.
There are number of Ivy league graduates out there who failed as investment managers, while few rose to dizzying heights using their sound knowledge of investment theory and a deep understanding of market fundamentals. If you want to be ahead of the pack and carve a niche for yourself as one of the best mutual fund managers, there is a lot of hard work that you must put in.
The risk of being such a manager lies in the fact that you can't afford to be wrong! Inaccuracies are tolerated, but blunders aren't, and there are very few who get a second chance. You need to always be on the top of your game, be willing to research the data thoroughly, study market fundamentals and create a portfolio for your investors, that can effectively deal with the market risks, promising a sizable return. My advice would be, to become a master, you must learn from the masters like Benjamin Graham, who have left several guideposts for you to follow, in the form of books like 'Securities Analysis' and 'Intelligent Investor'. Find a good mentor who can guide you and help you focus on the essentials.
To summarize everything that was discussed before, to become a mutual fund manager, you must acquire educational credentials which include an MBA degree in finance, CFA recognition and apprentice under expert fund managers. Put in your best, keep learning and gain experience. Slowly, as you get a hang of things, your expertise will speak for itself in the form of better results for your investors.
The trust and reputation you gain through an impeccable track record, by consistently making money for your investors, will enable you to start your own investment fund or may earn you an invitation from a big investment firm to be a part of their managing team. As far as this field is concerned, it's all about experience and the way you profit from it! I wish you, all the very best in your fulfilling your ambitions!