1. Your Questions About Investment
Nancy asks…
How is work in the investment industry like?
Hi, I am considering a career switch to the investment industry from an engineering career. I
am considering of taking up the CFA program to equip myself with the technical skills required
for this industry and at the same time, to enable me to step foot into this industry.
But before I decide whether to enroll in the CFA program, I would like to find out if this industry
is really suitable for me.(I do not have any friends working there).
Is there anyone who is working in the investment industry who is willing to share with me his
experiences and how the work there is like? Especially people who are in same situation as me
(who made a career switch) ?
Also, I'm quite interested in research and analysis of stocks and equities, and I'm strong in
numerical aptitude. What kinds of jobs are there available in the investment industry that will
allow me to utilize this strength?
Thank you for your replies in advance!
Steve Winston answers:
Give me an e-mail. I have a CFA charter and have worked in equities for more than a decade.
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2. There are lots of different types of work in "investments" from trading, to sales, to research, to
syndication, to private equity, to fund management and on and on.
The most likely sub-segment that would need technical skills is the following:
a) Research. This is where you do buy-sell-hold recommendation reports on company. You can
work for either the equity side (stock analyst) or bond side (credit analyst). Then you can work
for either the buy-side (mutual funds, insurance, hedge funds) or sell-side (brokerage).
Typically, you need a thorough background in accounting, a good background in finance (as
evidence through CFA program) and then an industry background that gives you a leg up when
giving research on a specific industry. For example, your typical pharmaceutical analyst for
brokerage has an MD. It isn't required, but it does help, especially for more technical industries
like medical, technology and energy. Long, long, long hours. Bad job security. Very, very
competitive. Bonuses can be very good. Politics can be very tough. You must be kind of a
know-it-all freak (like me) in order to really enjoy this job. I am and I did.
B) Corporate Finance. Instead of doing agency work, you're doing primary work. You're doing
lots and lots of pitch books to land deals to underwrite IPOs, equity placements or debt
placements. Once you win a deal, then you then do lots and lots of writing for the Red
Herring/Prospectus. Job can be repetitive. Travel can be large %. Pay can be very, very good.
C) IT back-end. This is only if you're hard core software engineering type. This is where you use
your knowledge of finance to help design software. This is the flip side. Pay can be outstanding.
James asks…
Is investment in Jomtien (thailand) condos among very good
investment options in Asia ?
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3. I am exploring investment in Jomtien (Pattaya, Thailand) condos. I like to know if Jomtien is
possibly among the very good real estate investment destination and can i expect 30%
appreciation per annum. I hear them some of the Thailand's highest towers are being built in
jomtien beach. I would like someone to also list top 3-4 condos schemes for investment in
2008, and some websites that give comparison of multiple schemes and most updated
information.
Steve Winston answers:
Sir
In India there are lot of opportunities where you can invest your money ,if you are sincere
please just drop a line,
I shall be here to reply your queries
George asks…
What is a good investment plan for funding a retirement?
Develop an investment plan with the ultimate goal of funding your retirement based on what
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4. you have learned so far.
Like how you would integrate estate planning into the investment plan you selected?
Steve Winston answers:
Vending machines or bouillon are the way to go for an investment that you don't have to actively
monitor. The stock market right now is a little too volatile, doubly so for real estate.
To get started with vending machines, check out http://www.vendingrules.com, or if investing in
silver/platinum/etc. Is a little more your style, http://www.buybullionnow.com/ is a good place to
start.
David asks…
When you convert your investment property to primary residence
are you required to notify your lender and refi?
What if you convert from primary residence to investment property? Do you have to notify your
lender? Do you have to refi?
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5. Aren't the interest rates different for primary residence and investment properties?
Steve Winston answers:
Residence loans are normally a longer term, up to 30 years, and a lower rate.
So if you have a investment property that you have now decided to make you primary residence
I would check with the bank and see if you could refi it. It will probably save you money.
However you are not required to.
As for doing it the other way primary residence to investment property? I know several people
that will buy a home fit it up while living in it for the required 2 or 3 years and then turn it in to a
rental home and buy another home.
Thomas asks…
What is the best investment to make today if I want to buy a home
in 5 years?
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6. I am 19. In 5 years I want to be able to buy a million dollar home. What is the best financial
investment i can make today with a few thousand dollars. I am looking for a general idea not a
specific investment. CD...treasury bill...Thank you
I just want to be able to put down a good downpayment for this house.
Steve Winston answers:
If you invest in the stock market in average risk stocks, a $5,000 investment will likely be worth
anywhere between $3,000 and $10,000 in 5 years.
If you invest in high risk stocks, a $5,000 investment will likely be worth between $1,000 and
$20,000 in 5 years.
If you play the futures/commodities market or invest in penny stocks, you will likely lose it all
within 1 year but if you don't, you could possibly have enough for your down payment.
If you get very lucky and pick the best performing stock during the 5 year period, your $5,000
could possibly turn in about $50,000 in 5 years.
Ken asks…
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7. How to calculate initial investment with changing compound
interest?
I need to calculate the initial investment required to reach a particular goal (say $200) in a
particular amount of time (say 20 years). The catch is that the interest is 5% the first five years
and then 10% every year after that. And its compounded yearly. I can find the initial investment
if the interest doesn't change, but I'm stumped trying to come up with the correct formula if the
interest changes after 5 years.
Any help is much appreciated!!!
Steve Winston answers:
FV = PV * (1 + i) ^ n
so i assume this should give you the results with the above results:
$200 = PV * (1 + 0.05) ^ 5 * (1 + 0.1) ^ 15
Solve for PV
Laura asks…
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8. What would your best recommendation be towards the investment
of your client with Madoff?
As part of your accounting services you provide limited financial planning services to your
clients. One of your clients asks you to review their portfolio and make recommendations for
investing an additional $100000 they currently have in cash. In reviewing their portfolio you note
that the client is adequately diversified for their age between fixed income and equities. The
equity portion of their portfolio is heavily weighted in an investment with a private money
manager named Bernard Madoff. Those securities have outperformed all the other investments
by 3-4% per year. When you ask the client about the investment, they tell you that they feel
lucky that they have been able to get Mr. Madoff to accept their account. His minimums are
usually over $1 million, but because several of their friends also invested with him at the same
time, he waived the minimum and took their investment of $250000. They further told you that
Mr. Madoff was formally president of the NASDAQ and has a track record of over 25 years of
beating the S&P 500. You do your due diligence and confirm your client's statements about
Mr.Madoff. He does indeed have a long term track record and was one of the founders of the
NASDAQ. On Wall Street, he is considered something of a guru, not unlike Warren Buffet, but
with a different emphasis.
Steve Winston answers:
Give madoff the money..I'm sure he's a stand-up guy
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9. Paul asks…
How do I deduct investment advisory fees paid for professional
investment services on my 2008 federal taxes?
What form do I use?
Is there a limit to the fees (I payed about $8K for investment fees)?
Do the fees get bundled into other "deductoins" so that I have to meet a threshold of expenses?
Thanks all!
Steve Winston answers:
Investment fees are a miscellaneous itemized deduction subject to the 2% AGI limit. Claim them
on Schedule A.
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10. Donna asks…
Can i become an investment banker with an entrepreneurship
major and computer science major?
I am planning on attending University of Indiana and i am wondering if i could become an
investment banker if i majored in Entrepreneurship and Computer science (double major)?
Also, IU has a great group called Investment Banking Network. Does anyone know if i could
get into this group without a finance major or possibly even a finance minor?
Steve Winston answers:
I know several instances where people became investment bankers without taking finance
courses./
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