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Trading Tips

Which to Choose: CFA or MBA

I got a question via a comment to my Trading Jobs – Making the Transition from a Non-Trading Job post which I thought presents a good follow on to my recent Picking a Good Business School post.

What is your opinion on the CFA program? Is it any good?
Will it help land a job in trading or money management (hedge fund)?

The CFA is the Chartered Financial Analyst designation. It is comparable to a CPA in terms of it being a test based certification. There are three testing levels which must be passed to become a CFA. You can learn more about it at www.cfainstitute.org.

The CFA is primarily a professional money management (think mutual fund or pension fund) type of designation. I took the first level of the exam right out of undergraduate. It’s pretty intense and covers a number of different subjects. I opted not to carry on in pursuit of the certification, however, because I really had no plan on getting into money management.

These days, the CFA and MBA are virtually interchangable. In most job postings which list a CFA requirement you will find “or MBA”. There are a few exceptions, but the either/or is something I’ve seen in most listings.

That being the case, my general view is that an MBA will serve you better than a CFA. This is a simple case of it being a wider certification, applicable in many more areas than a CFA. Considering that most people change careers multiple times in their life these days, the MBA offers more job flexibility than does the CFA. There’s also the networking that you do through the grad school process which the CFA cannot really match.

If you’re thinking in terms of trading, neither one is going to help you much more than to provide high level background and theory. They are not practical trading programs.

That’s my two cents anyway.

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Deep Posts Reader Questions Answered

Trading Jobs – Making the Transition from a Non-Trading Job

Jobs in trading and the financial markets are the target of many individuals, especially those coming out of school. I received a specific question the other day that I think is one many folks have:

I am technical student who just graduated from University of Pennsylvania who will start working in a couple of days. Of course my work would be technical. But at some point in time in my career I want to switch over to job involving financial analysis. Doing trading helps me in two ways. First it gives me good experience of analysing markets and studying financial instruments. Second and more importantly,its getting hard for me to resist playing this game. I somehow enjoy trading. Now as I  mentioned I want to switch my job within say 2 yrs, so I wanted some advice. Sure I am not pursuing an MBA this early. So i wanted ro know about various certifications involved with the art of trading. Thats because after say 2 yrs no company would employ me for a financial job on the basis on my Resume(since it is all technical), even if I become a good player of the game. Any suggestions about the way to start shaping up these 2 yrs?

First and foremost there are a lot of different type of jobs in the markets. It is definitely worth doing your research and figuring out which of them best suits you. Some are rather general, while others are very, very niche specific. I’ve been employed in the financial industry on and off for almost 15 years and even I am sometimes surprised out how diverse the arena is.

A good place to start that research is efinancialcareers.com. Go through the job listings and look at the types of credentials employers are looking for across the different position types. This will allow you to either match up your current qualifications, or give you an idea of what you need to be doing to qualify yourself for the job(s) you want.

If your objective is to work for an investment bank like Goldman Sachs or Bear Stearns, or in the market operation of other banks and institutions, then there are basically two primary paths. One is to make a lateral type of move from within the company, starting in a technology or back-office position, learning as much as you can along the way about the market operation, and impressing the folks into allowing you to make the move. Some companies do this more than others, so you need to feel that out with potential employers.

The other, more often talked about path onto a trading desk is via recruitment out of school, meaning either undergraduate or graduate. If you did not pursue and undergraduate degree in economics, business, or finance or land yourself a job from which you can jump laterally, you will probably have to go through an MBA program. In that way you can make a kind of fresh career start.

It’s strange, but as long as you are working in a particular field you will be pegged with that label, but if you are going through the recruitment process while in school you are a “student”, not a techie or a researcher or a writer or anything like that.

It might also sound contradictory, but having a personal trading background can actually make you less appealing to investment banks and the like. They want folks they can bring it to do it their way, not to do their own thing. While you may want to play up your basic knowledge of the market while going through the process, you probably don’t want to advertise yourself as a great trader.

That said, if it’s a job with a hedge fund or in money management, having a good trading background can be useful. It needs to be a consistent, well documented one, though. Nobody is going to take your word for it. If they are going to entrust money to you, they want proof.

If graduate school is something you’re thinking about, let me offer a couple of bits of advice. First, generally speaking, you want to wait at least two years before going to graduate school. The schools like to see work experience on your application and potential employers for internships and after-graduation jobs want to see that kind of thing as well. In fact, many schools want at least three solid years of employment these days. Secondly, take your GMATs either while still an undergraduate or shortly thereafter. If you wait too long you’ll get out of the test taking habit and not do as well.