What Do Investment Bankers Do

What Do Investment Bankers Do?

So, what do investment bankers do exactly?  The simplest explanation is that investment bankers are the world’s deal makers, usually acting as a type of broker. Basically, they match projects with money. Investment Bankers find projects, analyze them, cherry-pick the best, then structure them as investments and, lastly, find the investors (or in the case of an in-house investment banker present the project to the firm’s investment committee.) Most investment bankers will review over one hundred projects per year and eventually reject 99% of them. It’s a really difficult job. A great investment banker is literally worth more than his or her weight in gold. There are few great investment bankers… and even fewer after the 2008 financial crisis.

My Background In Investment Banking

To better understand what do investment bankers do I’m going to provide my background.  I have been an investment banker for the past thirty-eight years. I started at the ripe old age of eighteen with the purchase and syndication of two apartment buildings in Northern California, then went on to start one of the first video store chains in the United States. On my first group of syndications, I tripled my investors’ money within three years. Honestly, it was luck and timing.

Somewhere along the line, I developed a reputation and I managed to pick up hundreds of clients that I helped raise money for and manage their investor relations. Some of those clients you

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might recognize: IBM, AT&T, Chevron, ADP, FMC, Motorola, Lockheed Martin, Intel, State Farm, Allstate, and 19 other Fortune 500 companies. I have personally syndicated over 100 investments in my career and helped raise billions of dollars in equity for my clients.

I also worked in the entertainment industry writing, directing and executive producing motion pictures. There are 7 motion pictures based on my screenplays, two of which I also directed. I personally invested in or helped finance over 100 independent movies and I founded several successful media services companies in Southern California. Those are my credentials.

I have had my ups and downs–2008 was particularly tough–but I have survived and even prospered. Over the years, I have learned a few secrets about investing that I would like to share with you. If you are not already wealthy, I hope this information makes you become wealthy… like REALLY WEALTHY!

And if you are lucky enough to already be in the top 1%, then I hope this information helps you stay there and sleep better at night knowing your nest egg is safe.

They Usually Specialize

Investment bankers usually specialize in industry sectors such as energy, real estate, technology, consumer goods, minerals, communications, transportation, media, etc. They also specialize in the types of deals that they put together. Some work in mergers and acquisitions (M&A), while other develop IPOs. Many work in equity placement or financing. Some investment bankers specialize in financing startups and growing companies, while others only handle mature companies. Still others stay away from corporate finance and instead specialize in project financing (my personal favorite) like commercial real estate development or acquisition financing.

Their Education

To answer What do investment bankers do?  We need to understand more about their education. Most investment bankers start off graduating from a prestigious university, then working for a number of years at one of the big investment banks; Goldman Sachs, , Morgan Stanley, JP Morgan, Deutsche Bank, Credit Suisse, etc. Once they gain their confidence and develop their contacts many leave to launch their own firms and develop their own projects. Some end up running investment funds, while others remain independent putting deals together for sponsors in need of capital.

Those Rolodexes

Investment bankers keep massive Rolodexes or databases of investor contacts. My personal database has over 8,000 investor contacts all of which have over $100 million in assets. Investment bankers are similar to sports or entertainment agent in that their power comes from who they know and who will take their call on short notice.

Keen Eyes

An investment banker must always understand current capital market conditions, so they know which projects will get funded and which are a waste of time. They must have a keen eye and are always on the lookout for quality projects and sponsors. An investment banker must know how to structure an investment deal so that it is marketable to investors, while still leaving enough meat on the bone to incentivize the performance of the investment sponsor.

Now you should be able to answer what do investment bankers do!  Most successful investments over $10 million have an investment banker behind them. The new arena for investment bankers is crowdfunding. It is the ultimate free market system for raising capital and very well could change the way American business are financed. But more about that in posts to follow….

Is a financial advisor worth it

Are Fund Advisors Worth It? – Index Investing

You might be asking yourself if fund advisors are worth it. On the floor, index investing looks like an ideal match for do-it-your self buyers. The simplistic purchase maintain re-balance mantra of index fund proponents mixed with the abundance of assist from investing authors and on-line boards leads scores of knowledgeable buyers to tackle the duty of private portfolio administration annually. Many DIY buyers by no means look again; they treasure their newfound fiscal autonomy and the problem of overcoming future monetary hurdles. Others, nevertheless, uncover that they lack the time, curiosity, information or self-discipline to efficiently negotiate the damaging DIY terrain, they usually finally search assist from fund advisors. The function of this text is to obviously current the rationale for every strategy in order that index buyers can determine which tactic most accurately fits their wants and skills.

Why Investors Do it Themselves

Fund Advisors DIY Index

According to a 2019 research by the Investment Company Institute, the first purpose that DIY buyers handle their very own portfolios is that they need to be in management. There is a way of empowerment that comes with making your personal funding selections, and DIY buyers, particularly males, like holding the reigns. The research additionally discovered that almost all of DIY buyers consider that they’ve the required info and mental capacity to make nicely-knowledgeable, prudent monetary selections with out the assistance of knowledgeable. In the minds of those assured buyers, advisory charges are an pointless expense. Finally, many people discover private finance to be a rewarding pastime. According to the research, nearly all of DIY buyers take pleasure in conducting their very own monetary analysis, crunching numbers and intently);

Others select the DIY path not as a result of they love the thought of managing their very own investments, however as a result of they dislike the thought of hiring fund advisors. You might fall into this class in case you place a excessive worth in your monetary privateness, consider that the majority monetary advisors are incompetent or untrustworthy, or just need to get monetary savings by not paying advisory charges. The reality that fund advisors aren’t created equal supplies little solace to these whose opinions have been formed by the quite a few investor scandals of the previous yr or by a poor previous expertise with an advisor.

Finally, there’s a group of buyers who acknowledge that they might profit from skilled assist however lack an funding account giant sufficient to seize the eye of an advisor. First-time buyers typically fall into this class and have a tendency to hunt recommendation from public sources, family members or associates.

Why Would an Investor Hire Fund Advisors?

A good financial advisor can add worth to your portfolio in numerous methods. First, he acts as a gatekeeper, stopping you from making widespread return-decreasing errors. Numerous research have proven that particular person buyers routinely surrender as a lot as S% in annual returns on account of frequent buying and selling, trying to time the market and chasing previous efficiency. Even probably the most seasoned index investor wants the occasional reminder to keep away from distractions and stick together with his funding plan.

Good fund advisors offer entry to analysis, methods and funding decisions which have the potential to spice up returns. By understanding complicated points like tax administration, property planning and retirement forecasting, an advisor will help you higher perceive the probability of reaching your retirement objectives and recommend steps you could take to tilt the equation in your favor. Additionally, he could possibly increase your funding decisions by offering entry to unique fund households or share courses.

Finally, a great advisor performs laborious duties like portfolio monitoring and portfolio re-balancing so as to dedicate your time to different pursuits. An advisor who screens your portfolio incessantly can guarantee consistency together with your danger profile whereas probably squeezing extra returns from re-balancing exercise.

Closing Thoughts on Fund Advisors

Many buyers need a quantitative reply to the query of whether or not to rent an advisor; they need to know definitively whether or not an advisor would offer them with greater funding returns

after charges. In order to reply this query, you need to first ask your self whether or not you will have been capable of develop and persistently implement a low-value, disciplined funding plan by yourself. Many buyers do not have sufficient curiosity, information or potential to develop a wise plan; much more lack the required self-discipline to comply with one. If you end up veering off the trail to chase a scorching new sector or time the market, there is a good probability that an advisor would deliver some return-boosting self-discipline and objectivity to your funding selections);

If you do possess the psychological and bodily fortitude to develop a sound plan and persistently keep the course, you must in all probability look to qualitative elements to make your choice. For occasion, would you moderately spend the time that you simply dedicate to funding administration on different issues, like visiting household or pursuing different pursuits? For many buyers, the reply to this query modifications later in life as monetary conditions turn into extra complicated, the results of poor selections grow to be extra extreme, and time with household turns into a much bigger precedence.

Conclusion on Fund Advisors

The backside line is that managing your personal index portfolio could also be easy, nevertheless it’s not straightforward. If you determine to supervise your personal investments, defend your self towards the tendency to stray out of your funding plan by drafting an Investment Policy Statement. If you determine to rent knowledgeable, select a payment-solely advisor who agrees together with your passive investing philosophy, embraces his fiduciary duty to behave in your greatest pursuits, and is prepared and in a position so as to add worth within the methods described above. Whichever path you select, you’ll be able to maximize your probabilities of investing success by precisely assessing your danger angle and capability, designing a diversified, low-value portfolio, and sticking together with your plan.

Standard Deviation as a Measure of Risk

Standard Deviation as a Measure of Risk for Stocks Explained

One of the preferred ways in which buyers will decide the dangers related to a given funding is to review its normal deviation. While mildly difficult to reach at, the usual deviation supplies numerous useful details about a safety’s worth and, particularly, the way it will “sometimes” behave.  This is why know about the standard deviation as a measure of risk for stocks is important.

In its purest type, the usual deviation tells buyers how a lot they will anticipate a safety’s worth to fluctuate from its imply returns. That signifies that if a safety usually earns 10% per year, a excessive commonplace deviation will recommend that day-to-day fluctuations shall be excessive whereas a a low normal deviation will point out that fluctuations can be decrease. In different phrases, securities a with normal deviation can be thought-about extra risky than securities with a low determine);

The significance of understanding this numbers comes right down to portfolio development. Consider a extra-balanced investor who needs to take pleasure in regular progress, understands there may be worth fluctuations however actually doesn’t need to see giant swings in a portfolio’s worth. Putting collectively a household of securities may contain selecting some shares which have greater volatility and offsetting these shares with securities which have decrease volatility. Standard deviation helps with this course of.  Related article: How to Fight Inflation.

Why is it Important to Know the Standard Deviation as a Measure of Risk?

The good factor about understanding this statistical measure is that it’s particular to the safety. In different phrases, though a safety may be a part of an general index, some might and can behave indifferently to regardless of the broader market is doing. And that degree of volatility may be unbiased of the market’s volatility as properly. Standard deviation as a measure of risk tells us precisely what to anticipate from such securities, no matter what its relationship to the broader market could be.

The shortfall with this measure is that it’s based mostly on historic knowledge and might be pretty simply manipulated. Since it can measure returns over a interval days, weeks, months and typically years, the precise commonplace may be inaccurately masked behind longer-time period market circumstances (e.g. utilizing the final 10 years) or can present inaccurately excessive deviation (e.g. utilizing the final S months of risky interval);

Therefore, warning must be exercised when counting on this measurement and relying on present market and financial circumstances, the investor or analyst should determine how “watered down” the measurement ought to be (e.g. during times of heightened volatility, it might make higher sense to undertake an extended-time period interval, corresponding to a year or a number of years). Regardless, buyers ought to be nicely conscious of the parameters that go into the usual deviation.

How to Fight Inflation

How To Combat Inflation? – 5 Strategies To Fight Inflation

Inflation – Rising Prices – Can Make It Difficult To Get Ahead

Inflation occurs when prices are steadily and noticeably on the rise.  Out of control inflation can wreak havoc on an economy, and for individuals even moderate inflation can make it challenging to get ahead.  The purpose of this article is to provide some concrete, practical strategies regular people can use to combat the effects of inflation.

How Inflation Affects Regular People

One of the positives of inflation is that wages generally rise.  Isn’t that great!  If only the story stopped there it would be.  The problem is that inflation causes costs rise as well.  For example, if you rent then each time your lease is up then your rent will noticeably increase, thus eroding the effects of your higher wages.  It’s not just rent.  Inflation causes the price for gas, groceries, electricity, mobile phone usage, movie tickets, clothing, and all kinds of things regular people need and want to rise as well, making it a struggle for regular people to keep their heads above water.

How To Combat Inflation? – Lock In Your Costs!

What if your income is $100 and your expenses are also $100.  Now, if your wages increase to $110 due to inflation but your expenses also go up to $110 then you would just be treading water financially.  However, if your wages went up to $110 but your expenses stayed at $100 THEN you would be getting somewhere.  One of the keys on how to fight inflation is to lock in your expenses.  But how can regular people do that?  Here are some strategies on how to combat inflation.

How To Combat Inflation Fixed RateStrategy #1 – Buy A Home With A Fixed Rate Mortgage

Housing is most people’s most significant monthly expense, so it follows that if you can lock in your housing costs then you really put a stake in the ground when we answer the question of how to combat inflation.  How does a regular person do that?  By buying a home with a fixed-rate mortgage.  Doing so locks in your housing costs, and as inflation increases then your purchasing power can actually increase as well (because your wages should continue to rise, yet your housing costs should remain the same).

Strategy #2 – Refinance Your Variable-rate Mortgage To A Fixed-rate Mortgage

As I stated above, on how to combat inflation, it’s not enough to just to own a home, you need to either own it outright (congratulations if you do!) or you need to refinance to a fixed-rate mortgage.  Why?  Because interest rates tend to rise with inflation, and if every time you get a raise your mortgage resets to a higher amount due to an increase in interest rates then you’ll always struggle to get ahead of the inflation curve.

Strategy #3 – Buy Your Cars Rather Than Lease

Cars are often regular people’s second most expensive monthly cost.  So if inflation strikes then you may have a decent car lease today, but when it comes time to renew then the cost to do so will be significantly higher.  On the other hand, if you buy your car then you lock in the cost, and the more years you drive it the more effectively you’ll battle inflation. Read more: Leasing vs buying a car pros & cons.

Strategy #4 – Have Some Of Your Financial Reserves In A Money Market Account

The stock market struggles to do well during periods of inflation because borrowing costs are high for businesses (due to high interest rates).  Bonds do even worse, because as interest rates  increase they take a hit in value.  So what can you use for a financial reserve?  A money market account is a good option because the interest it earns will rise with inflation, and money market accounts also have the advantages of being liquid and relatively safe.  If you want even more safety (at the cost of a lower interest rate) then put your money in an FDIC-backed savings account instead.

Strategy #5 – Avoid Variable-rate (Or Floating) Consumer Debt To The Extent Possible

Again, when inflation rises it takes interest rates along with it.  So if you have a substantial amount of consumer debt then it increases your exposure to the negative effects of inflation.  Credit card debt is one obvious example.  However, a less obvious example is a home equity line of credit with a variable interest rate.  If you’re caught with a high balance (through financing major home improvements or college tuition, for example) then try and lock in your rate if at all possible (check out borrowing against your 401k plan as an alternative).

An Inflationary Economy Unmasks Poor Financial Choices

The strategies above generally work well during most economic cycles, so what’s the big deal?  It’s important to keep in mind that a good (or even a stable) economy can mask less than ideal choices.  For example, if you got a variable-rate mortgage while interest rates are flat or declining you would notice little or no difference between your situation and someone who had a fixed rate.  On the other hand if inflation took off then it would take your monthly mortgage payment with it, and that could cause you to feel a strain on your finances in a very real way.

In summary, inflation has serious and far-ranging effects on both individuals and the broader economy.  While the strategies above may at first blush seem general and applicable to most any economy, they are particular well suited to deal with an inflationary environment.  Thus by taking steps on how to fight inflation you can not only weather it well, but you make it work for you.

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