InvestLL Archives

May

2025

Pros & Cons of Sector Investing

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

Sector investing simply refers to targeted investing in a particular market sector or industry. Finance, real estate, utilities, and retail are a few examples of common sectors.

Many institutional investors use a sector investing strategy, but it’s one that individual investors can use as well, either by selecting individual stocks according to a theme or to describe different exchange-traded funds (ETFs) or mutual funds that focus their investments on a single sector.

Key Points

• Sector investing focuses on specific market segments, allowing targeted exposure.

• ETFs provide an accessible way to invest in sectors, enhancing portfolio diversification.

• Diversification within sectors can help mitigate risks, balancing potential losses and gains.

• Sector investing may involve significant volatility and concentration risk, impacting returns.

• Sector rotation strategies align investments with economic cycles, optimizing performance.

Common Investing Sectors

Investors who want exposure to the following sectors can either invest directly in companies or assets, or invest in ETFs or mutual funds composed of securities within that sectors.

Health Care

This section focuses on companies that contribute to health care needs and related endeavors. These may include hospitals and related real estate, health insurance companies, pharmaceutical companies, companies that make medical devices, and more.

Precious Metals

The precious metals sector is historically seen as a relatively safe haven asset that investors tend to flock to in times of crisis. Even outside of a crisis, companies involved in the exploration of new metal deposits and mining of those deposits can sometimes provide significant returns.

Investors may be keen to find ways to invest in gold, but other examples include mining companies, direct investments in commodities, or in funds or ETFs that hold them.

Real Estate

This sector includes real estate developers and property owners, as well as mortgage-backed securities.

Real estate investors may also choose to put money into real estate investment trusts (REITs), which use investor money to acquire income-producing properties like data centers, office builds, shopping malls, or apartment buildings. One attractive feature of REITs is that they pay out a large portion of their income in the form of dividends to investors.

Utilities

Utility investing focuses on companies that provide utilities like phone and internet service, electricity, or natural gas. Utilities are considered to be a defensive sector, since they tend to do well during a recession because people almost always need the services they provide.

Tech

Technology companies have become an increasingly large part of the economy as more organizations continue to undergo digital transformation. Investments in the tech sector might include streaming video providers, computer companies, or social media companies.

Consumer Staples

This sector focuses on the companies that make or sell items that people need to buy, such as supermarkets, food producers, and convenience stores.

Consumer Discretionary

This sector includes companies that make or sell goods that people like to purchase but don’t need, such as e-commerce companies, home improvement, apparel, or sporting goods retailers. This sector tends to perform well during times of economic expansion and to lag during a recession.

Energy

This sector focuses on companies that produce or supply energy. That may include oil drillers, coal miners, and pipeline operators. Some energy investors might focus only on stocks in the renewable energy space, such as wind farms or solar panel producers.

Pros of Sector Investing

Some of the benefits involved in sector investing include diversification and the ability to invest with market cycles.

Diversification

Investing in multiple sectors of the economy is one method of attaining diversification within a portfolio, which involves investing in many different types of stocks. If some sectors produce outsize gains, they can help offset lower returns in other sectors.

Rotation Strategy

One of the more common sector investing strategies is sector rotation, meaning that investors change their allocation to certain sectors depending on the economic cycle. For example, they might invest more heavily in the utility sector during a recession, when utilities tend to outperform, and move those funds into consumer discretionary goods during a recovery.

Cons of Sector Investing

While sector investing may prove beneficial, it also has its potential drawbacks. Some of the same features that make this strategy profitable or appealing can also make it risky.

Potential Volatility

Things that impact one sector as a whole tend to affect most or all companies within that sector. As a result, a single relevant event or news headline could have dramatic consequences for those heavily invested. This could result in large moves upward or downward.

For example, imagine being heavily invested in the oil and natural gas sector. Suddenly, the demand for energy plummets because of restrictions on travel, decreased consumer spending, and overall lack of demand for petroleum products. This would likely have a dramatic effect on nearly all companies in the oil and gas sector, leading to potentially large losses for investors with a large exposure to this sector.

On the other hand, if markets became optimistic that a future event would restore demand, or something happened to decrease supply, then volatility could swing the other way pushing up the value of investments.

Concentration risk

Concentration risk is a form of investment risk in which investors over-allocate a portion of their portfolio to a single sector and lose the downside protection that may come with a properly diversified portfolio, which spreads investments across different types of assets to minimize risk.

It is notoriously difficult for individual investors to sustainably engage in stock market timing, in which they can precisely determine the most optimal time to buy and sell a specific investment.

Sector ETF Investing

Investing in sector-focused ETFs is one of the easiest and most common ways to invest in sectors. Sector-specific exchange-traded funds hold dozens or hundreds of stocks within a specific sector, allowing investors to get exposure to the entire sector without having to make investments in individual companies.

Choosing an ETF takes less time and research than choosing many individual stocks. While ETFs may not experience the same level of gains as individual stocks, they also have less volatility.

The Takeaway

Sector investing involves making investments in specific parts, segments, or sectors of the economy. There can be pros and cons to doing so, and investors should consider all factors or even speak with a financial professional before making a decision.

To determine the best investing strategy for you, you’ll need to consider your long-term goals, your risk tolerance, financial objectives, and the amount of time and effort you want to spend choosing investments.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What is sector investing?

Sector investing refers to targeted investing in a particular market sector or industry, and can be utilized as a strategy incorporating stocks, funds, or other assets.

What are common sectors that investors invest in?

Some common sectors or industries that sector investors invest in include finance, real estate, utilities, and retail, among many others.

What are the risks of sector investing?

A couple of common risks associated with sector investing include concentration risk, and risks associated with increased volatility within specific sectors.

Photo credit: iStock/diego_cervo

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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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SOIN-Q225-054

May

2025

What to Know About a Market Sell-Off

By Anna Davies | Growing Wealth, invest, Investing | Comments Off

A market sell-off occurs when a large pool of investors decides to sell stocks. When they do this, stock prices fall as a result. A market sell-off may be due to external events, such as public health emergencies or natural disasters. But sometimes, sell-offs can be triggered by earnings reports that failed expectations, technological disruption, or internal shifts within an industry.

During a market sell-off, stock prices tumble. That stock volatility might lead other investors to wonder whether they should sell as well, whether they should hold their current investments, or whether they should buy while stock prices are low. There are a lot of things to consider.

Key Points

• A market sell-off occurs when a large group of investors sells stocks, causing prices to drop.

• Causes of sell-offs may include external events, industry changes, and corporate news.

• Timing the market can be difficult to do, often requiring luck as well as deep industry knowledge.

• Risk tolerance can influence how investors handle market sell-offs.

• Diversification helps protect a portfolio from market volatility.

Understanding Bull Markets vs Bear Markets

Understanding the overall stock market environment can help investors understand how sell-offs exist within the market.

It’s not uncommon to see references to a bull market and a bear market. A bull market is when the stock market is showing gains. Some suggest that a 20% (or higher) rise in the broader market index over a period of two months or more indicates a bull market, but the phrase is commonly used when stocks are “charging ahead,” and is generally considered a good thing for investors.

A bear market, on the other hand, is typically used to describe situations when major indexes fall 20% or more from their recent peak, and remain there for at least two months.

There are also “corrections.” This is when the market falls 10% or more from a recent stock market high. Market corrections are called such because historically, they “correct” prices to a longer-term trend, rather than hold them at a high that’s not sustainable. Sometimes, corrections turn into a bear market. Other times, corrections reach a low and then begin to climb back to a more level price, avoiding a bear market.

What to Do During a Market Sell-Off

A sell-off can make news, and can make investors feel on-edge. After all, investors don’t want to lose money and some investors fear that a sell-off portends more bad news, like a bear market.

Other investors see sell-offs as an opportunity tobuy stocks at lower prices before the market bounces back. But a sell-off or correction may not trigger a dramatic change in every investor’s portfolio. That’s because a sell-off or correction may be limited to a certain market sector or group of stocks, such as if a tariff impacted select companies.

So, what should an investor do during a market sell-off? That depends on the goals of an investor. Market sell-offs are “normal” fluctuations of the market, and investors who have a diversified portfolio may not do anything. Others may choose to either buy or sell, and neither decision is one-size-fits-all.

Pros & Cons of Selling During a Sell-Off

Some investors may get spooked and sell stocks in fear that the market will slide further. But while taking money out of the market may give investors confidence and cash in their pockets, removing money from the market might make it hard for investors to decide when to re-invest in the market in the future. As a result, they may miss opportunities to take advantage of compounding returns in investments.

Pros & Cons of Buying During a Sell-Off

Other investors may see a sell-off as an opportunity to invest when the market is down. They might buy stocks at a lower price, then wait for the market to bounce back. But a market sell-off may not necessarily be the optimum time to buy stocks, especially if it’s unclear what’s driving the sell-off.

Many investors pride themselves on their perceived ability to “time the market,” or buy stocks right before they begin to rise again. But the truth is that attempting to “time the market” often relies on luck, deep knowledge of the industry, timing, or a combination of all three, and it can easily backfire

For many investors, the best way to “time” the market may be to invest when they can afford to do so in a diversified portfolio, and allow their money to ride out the highs and lows of market movements.

Why Risk Tolerance Matters During Market Sell-Offs

Understanding your own risk tolerance and investment goals can help an investor decide how to handle a market sell-off. Risk tolerance is the amount of risk an investor is willing to take, and depends on several factors.

• Risk capacity. This is your ability to handle a risk. For example, people who are depending on their investment portfolio to fund their lives, such as retirees, may have a lower risk tolerance than young people who have years for their portfolio to make up losses.

• Benchmarks. Are there benchmarks their portfolio has to hit at set periods of time so that their portfolio reaches the goals they have set?

• Emotional tolerance. All investors have different emotional capacity for risk tolerance that may be independent from the actual amount of money within the portfolio.

Understanding your personal risk tolerance can help you build an investment portfolio that may be less vulnerable to market sell-offs and can also give you less trepidation during a sell-off.

💡 Quick Tip: When people talk about investment risk, they mean the risk of losing money. Some investments are higher risk, some are lower. Be sure to bear this in mind when investing online.

How Diversification Can Help Protect a Portfolio From Sell-Offs

A portfolio diversification strategy may be different between investors, but the underlying logic of any diversification strategy is that they shouldn’t put all of their eggs in one basket. Since it’s not unusual for a sell-off to affect only parts of the market, a diverse portfolio may be able to better ride out a market sell-off than a portfolio that is particularly weighted toward one sector, industry, or exchange.

Some investors may diversify with a range of assets in their portfolio. Others may diversify their portfolio with a range of domestic and international stocks. And others may see diversification as a way to invest beyond the market, such as investing directly in real estate, art, or other different types of alternative investments that are independent of market movement.

Another way some investors ensure diversification within their portfolio is to focus the majority of their portfolio on exchange-traded funds (ETFs) and mutual funds, instead of individual stocks. ETFs and mutual funds can contain hundreds or even thousands of securities across asset classes, which can potentially make the fund less vulnerable to market dips.

Protecting a Portfolio From Sell-Offs

In addition to building a portfolio that’s less vulnerable to market volatility, investors have several options to further protect their portfolio. These preventative investment measures can remove emotion during a market dip or sell-off, so that an investor knows that there are stopgaps and safeguards for their portfolio.

Stop Losses

This is an automatic trade order that investors can set up so that shares of a certain stock are automatically traded or sold when they hit a price predetermined by an investor. This can protect an investment for an individual stock or for an overall market drop. There are several stop loss order variants, including a hard stop (the trade will execute when the stock reaches a set price) and a trailing stop (the price to trade changes as the price of the stock increases).

Put Options

Put options are another type of order that allow investors to sell at a set price during a certain time frame; “holding” the price if the stock drops lower and allowing the investor to sell at the higher price even if the stock drops further.

Limit Orders

Investors can also set limit orders. These allow an investor to choose the price and number of shares they wish to buy of a certain stock. The trade will only execute if the stock hits the set price. This allows investors freedom from tracking numbers as price points shift.

The Takeaway

A market sell-off is triggered when a large group of investors sell their stocks at once, causing stock prices to drop. A sell-off can be caused by world events, industry changes, or even corporate news.

There is no single smart way to react to a sell-off. Different investors will gravitate toward different strategies. But by researching companies and setting up a portfolio based on risk tolerance, an investor can feel confident that their portfolio can withstand market volatility.

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q225-033

May

2025

The Basics of Electronic Trading

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

Electronic trading refers to the process of conducting trades in financial markets through an online broker-dealer using the internet. These trades can take place in the stock, bond, options, futures, or foreign exchange (FOREX) markets. Electronic trades can only be conducted during standard market hours: between 9:30 am and 4 pm Eastern Standard Time on weekdays. Traders can create orders after markets close, but the orders won’t be executed until the next trading day.

This represents a big change from the way the stock exchange worked prior to the internet, when traders would gather in one central place like The New York Stock Exchange (NYSE) and buy and sell stocks in person. With advances in digital technology, that’s no longer necessary, and the age of electronic trades now dominates.

Key Points

• Electronic trading enhances convenience and reduces costs, allowing easy access to financial markets.

• Investors should consider platform features, fees, and alignment with investment goals.

• Market, limit, and stop-loss orders help manage investments effectively.

• Tax implications include capital gains and losses from trading activities.

• Risks involve lack of guidance, quick market changes that investors are unable to keep up with, and accumulating fees.

How to Start Electronic Trading

Many investors today will only ever engage in online stock trading. Traders no longer need a personal broker whom they have to call on the phone each time they want to buy or sell a security.

Instead, investors can now open an online brokerage, create an account, and start placing trades. But choosing a platform is only step one in electronic stock trading. After that, you’ll need to decide what stocks to trade, what type of orders to use, what expenses will be involved (if any), and how trading might affect your tax liability.

Choose an Electronic Trading Platform

There are many electronic trading platforms to choose from. They are all similar in many ways, with general ease of use: Signing up and getting started can take less than an hour, with perhaps a few days of wait time involved for identity or “know your customer” verification.

Among the various platforms, there are slightly different features or different options as far as the user experience is concerned. Not too long ago, most platforms charged a commission fee for each buy or sell order executed, and there was a minimum amount of money needed to create a new account.

Recently, many brokerages have eliminated trading fees, and few still require account minimums, although there may be other costs associated with your investments. It’s important to understand what you’re being charged, because even small amounts add up over time and can reduce investment returns.

Research Stocks or ETFs

There are thousands upon thousands of securities to choose from, and many different types of markets and exchanges. When first starting out, it’s easy to get overwhelmed by all the choices.

Thankfully, online brokerages offer tools to help investors get started. There is also an abundance of free information online about investing. There are numerous sources that provide news and analysis on a daily basis to help investors learn and stay informed about new market opportunities.

Recommended: Investing Guide 101

Determine Which Type of Order to Use

It might be common to assume there are only two types of orders: a buy order and a sell order. In actuality, there are many different types of orders.

The type of order that likely comes to mind for most new investors is known as a market order. This is simply an order to buy or sell a security at whatever price it’s trading at right now.

Another type of buy order is a limit order. This is an order to buy at or below a specific price. The order can remain on the books for a day, sixty days, or until canceled, and will be filled whenever the security falls to the specified price.

This can help investors wait to buy a security at a cheaper price without having to monitor things. Limit orders also help protect against sudden spikes in price. If a market order is used just before a large price increase, an investor could pay more for a security than expected.

A stop-loss order can help traders limit losses. Like a limit order, a stop-loss gets triggered when a security falls to a specific price. But as you might have guessed, unlike a limit buy order, a stop-loss order will initiate a sell when triggered.

Consider Tax Implications

Buying securities usually doesn’t invoke any tax liability. But selling does generate a taxable event. Selling at a gain often requires an investor to pay capital gains tax, while selling at a loss could result in a capital loss, which investors can sometimes use to reduce their taxable income.

The subject of taxes and investing is long and involved. New investors might want to consider researching the tax implications of buying and selling securities on their own and consult with a tax professional.

The Risks of Online Trading

In addition to the convenience that electronic trading offers investors, it does come with some risks. The main caveat of online trading is that it gives investors the opportunity to try new strategies (like options trading) or explore new types of investments without the benefit of expert guidance.

All investments come with the risk of loss, meaning you can lose all the money you’ve invested, or more, in some cases. It’s important to balance the opportunities with the downsides when electing to explore new investments.

The Takeaway

The era of online or electronic trading is here to stay, thanks to its lower cost structure as well as the overall convenience and ease-of-use that online platforms provide for investors. Now investors can set up and manage a wide range of portfolios — from day trading to retirement — right from their own computers.

Electronic trading does have its limitations, though. Things move quickly, fees can add up, and sometimes there are investment options available that require more time and expertise, which may not be available through an online platform.

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q225-034

May

2025

The Basics of Electronic Trading

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

Key Points

• Electronic trading enhances convenience and reduces costs, allowing easy access to financial markets.

• Investors should consider platform features, fees, and alignment with investment goals.

• Market, limit, and stop-loss orders help manage investments effectively.

• Tax implications include capital gains and losses from trading activities.

• Risks involve lack of guidance, quick market changes that investors are unable to keep up with, and accumulating fees.

How to Start Electronic Trading

Many investors today will only ever engage in online stock trading. Traders no longer need a personal broker whom they have to call on the phone each time they want to buy or sell a security.

Choose an Electronic Trading Platform

Research Stocks or ETFs

There are thousands upon thousands of securities to choose from, and many different types of markets and exchanges. When first starting out, it’s easy to get overwhelmed by all the choices.

Recommended: Investing Guide 101

Determine Which Type of Order to Use

It might be common to assume there are only two types of orders: a buy order and a sell order. In actuality, there are many different types of orders.

The type of order that likely comes to mind for most new investors is known as a market order. This is simply an order to buy or sell a security at whatever price it’s trading at right now.

Consider Tax Implications

The Risks of Online Trading

The Takeaway

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q225-034

May

2025

What Do Investment Bankers Do?

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Investment banking is a specialized area of the financial services industry that focuses on aiding governments, corporations, and other entities to raise capital and complete mergers and acquisitions. The term “investment banker” refers to an individual who works for an investment bank that offers these services.

Investment banking is typically considered to be a prestigious career, and becoming an investment banker can be lucrative for those willing to complete the necessary education and training.

Key Points

• Investment bankers do a number of things, such as raising capital through initial public offerings, bond issuance, and equity financing.

• Investment bankers are also known for assisting in mergers and acquisitions for companies.

• They also offer financial advisory services to clients.

• Conducting investment research for informed decisions is another key component of an investment banker’s job description.

• Investment bankers also manage asset investments for optimal returns.

What Is an Investment Banker?

Investment bankers work for investment banks, which are effectively middlemen between entities that need capital and entities that provide it. In simpler terms, investment bankers help their clients to expand and grow their businesses or operations.

Another way to think of an investment banker is as a financial advisor to governments, corporations, and other businesses. As part of their professional duties, they may guide clients in making financial decisions that directly or indirectly affect their bottom line.

Investment bankers are most often associated with Wall Street, though they work in cities throughout the world. Some of the largest investment banks in the United States include Goldman Sachs & Co., Morgan Stanley, J.P. Morgan, Bank of America Merrill Lynch, and Blackstone.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

What Do Investment Bankers Do?

Investment bankers play an important role in helping companies achieve their financial goals. When a corporation is planning an upcoming expansion project, for instance, its board may turn to an investment bank for help. An investment banker can analyze the company’s financial situation to determine the best way to meet its needs.

In terms of the specific tasks an investment banker may carry out, that depends largely on the type of clients they work with.

Assisting With Initial Public Offerings

Investment bankers can play a critical role in helping clients secure capital. Depending on the client, this can be done through a variety of means, including the launch of an initial public offering (IPO).

An initial public offering, or IPO, allows private companies to offer shares of their stock to the public for the first time. The investment banker assists by creating a prospectus explaining the details of the IPO, marketing it to potential investors, and navigating Securities and Exchange Commission (SEC) compliance rules.

Investment bankers are often key to whether the company’s IPO is a success. They help determine the initial price of the offering, which is critical. Pricing too high could scare off investors, while going too low could undercut the capital their clients raise.

Bond Issuance

Government agencies and corporations often use bonds as a fundraising tool. For example, if a city government needs money to improve local roads, they might issue a municipal bond to fund the project. Investors purchase the bonds on the bond market, giving the government the capital it needs to complete the road updates. Investors can hold onto the bond and earn interest on it, or they can sell it to another investor.

As with an IPO, an investment banker’s role in issuing bonds may include preparing the bond issuance documents, setting a price, submitting it to the SEC for approval, and marketing the bond to investors to raise capital.

Equity and Debt Financing

Equity and debt financing are two other ways that companies can tap into funding. With equity financing, companies raise capital by selling an ownership share in the business. Venture capital and private equity are common examples of equity financing.

Debt financing involves taking out loans or lines of credit, without giving up ownership stakes. An investment banker can help companies assess which type of financing makes more sense for their business model, and help them work through the process of securing the funding.

For example, investment bankers may work with startups to pitch angel investors, while they might help more established companies compare and select loan options.

Mergers and Acquisitions

Another common task that investment bankers assist companies with is mergers and acquisitions. In a merger, two companies enter into an agreement to become a single business entity. Each company is treated as an equal in the transaction. An acquisition, on the other hand, involves one company purchasing another.

In either type of arrangement, companies may use investment bankers to oversee the process. This could involve negotiating the terms of a merger or acquisition and reporting the details of the transaction to the SEC to ensure compliance. When a company considers an acquisition, investment bankers can also help identify and vet potential targets.

Investing and Asset Management

While investment bankers’ duties primarily revolve around raising capital for their clients, there are other services they may perform. This can include things like:

• Investment research and analysis

• Buying and selling securities

• Offering advisory services

• Asset management

These services are similar to what a personal financial advisor might offer their clients.

💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.

How to Become an Investment Banker

If you’re interested in a career in investment banking, there are a few things to know.

In terms of education, a bachelor’s degree is typically a minimum requirement for most investment banker jobs. Though some investment banks may look for candidates that have earned a higher degree of education, such as an MBA or a graduate-level degree in finance.

Aside from education, there are certain skills that may help you be successful as an investment banker. Those include:

• Ability to perform under pressure

• Good communication skills

• Solid marketing skills

• Firm grasp of financial markets and modeling

• Strong attention to detail

Depending on your responsibilities, you may also need a securities license. That may include completing one or more of the following licensing exams:

• Series 7 General Securities Representative Qualification Examination (GS)

• Series 79 Investment Banking Representatives Exam

• Series 63 Uniform Securities Agent State Law Exam

Before you can take these exams, you first have to be employed and sponsored by a FINRA-member firm or other self-regulatory organization member.

Taking and passing the Securities Industries Essentials (SIE) Exam could help improve your chances of being hired as an intern or junior employee. That process begins early, with many banks hiring summer interns more than a year ahead of the start of the program.

How Much Do Investment Bankers Earn?

Investment bankers generally earn above-average salaries. Even at the entry level, it’s possible to make $100,000 or more, and salaries for top Wall Street bankers can easily range into the millions or tens of millions. But investment banking is one of the hardest jobs on Wall Street. So, if you’re not prepared to routinely work 100-hour weeks or constantly be on-call for your clients, it may not be the job for you.

The Takeaway

Investment bankers work primarily with institutional investors, governments, and corporations rather than individual investors. But you can still benefit from the work investment bankers do behind the scenes indirectly.

Investment bankers may work in a variety of roles, such as helping facilitate IPOs, or mergers and acquisitions. It can be a lucrative career path, too, but generally requires a graduate-level education, and additional licensing.

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What is an investment banker?

An investment banker is a financial professional that works for an investment bank, and generally, helps their clients to expand and grow their businesses or operations.

What are some common things that investment bankers do?

Investment bankers do a number of things, including issuing bonds, facilitating initial public offerings, managing investors’ portfolios and assets, and more.

How much are investment bankers paid?

Careers in investment banking tend to be lucrative, with salaries typically in the six figures, and ranging well into the millions. It is, however, a difficult and time-intensive job, with some people working 80-, 90-, or even 100-hour weeks.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Photo credit: iStock/fizkes

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q225-057

Pros & Cons of Sector Investing

Common Investing Sectors

Health Care

Precious Metals

Real Estate

Utilities

Tech

Consumer Staples

Consumer Discretionary

Energy

Pros of Sector Investing

Diversification

Rotation Strategy

Cons of Sector Investing

Potential Volatility

Concentration risk

Sector ETF Investing

The Takeaway

FAQ

What is sector investing?

What are common sectors that investors invest in?

What are the risks of sector investing?

What to Know About a Market Sell-Off

Understanding Bull Markets vs Bear Markets

What to Do During a Market Sell-Off

Pros & Cons of Selling During a Sell-Off

Pros & Cons of Buying During a Sell-Off

Why Risk Tolerance Matters During Market Sell-Offs

How Diversification Can Help Protect a Portfolio From Sell-Offs

Protecting a Portfolio From Sell-Offs

Stop Losses

Put Options

Limit Orders

The Takeaway

The Basics of Electronic Trading

How to Start Electronic Trading

Choose an Electronic Trading Platform

Research Stocks or ETFs

Determine Which Type of Order to Use

Consider Tax Implications

The Risks of Online Trading

The Takeaway

The Basics of Electronic Trading

How to Start Electronic Trading

Choose an Electronic Trading Platform

Research Stocks or ETFs

Determine Which Type of Order to Use

Consider Tax Implications

The Risks of Online Trading

The Takeaway

What Do Investment Bankers Do?

What Is an Investment Banker?

What Do Investment Bankers Do?

Assisting With Initial Public Offerings

Bond Issuance

Equity and Debt Financing

Mergers and Acquisitions

Investing and Asset Management

How to Become an Investment Banker

How Much Do Investment Bankers Earn?

The Takeaway

FAQ

What is an investment banker?

What are some common things that investment bankers do?

How much are investment bankers paid?

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