How To Become Portfolio Manager
A portfolio manager is a financial professional who oversees the investments of a company or individual. The portfolio manager selects the funds and securities that will be included in the investment portfolio, monitors the performance of those funds and securities, and makes changes as necessary to optimize returns.
While there are many paths to becoming a portfolio manager, most professionals start out by earning a bachelor’s degree in finance or business management. Many people also earn an MBA before entering the field.
After graduation, aspiring portfolio managers can take certification exams offered by organizations such as the American Society of Pension Professionals & Actuaries (ASPPA) or the Chartered Financial Analyst (CFA) Institute.
Once they have established themselves in their careers, professionals can advance into senior positions such as chief investment officer or chief financial officer (CFO).
How To Become Portfolio Manager
A portfolio manager is a financial specialist who helps clients or companies oversee their asset and/or investment portfolios. While it is a competitive and challenging career, it is also a rewarding career path if you’re interested in the stock market and finance. In this article, we examine what a portfolio manager is, what their responsibilities are and how to become one.
Related: Working With a Financial Portfolio: Definition and Tips
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What is a portfolio manager?
A portfolio manager is a specialist in the financial services industry who manages investment portfolios for individuals or companies. Clients hire portfolio managers to manage financial strategies that can yield returns through a mix of securities and investment products.
Portfolio managers oversee the entire investment process from strategic planning to implementation. They perform many tasks such as meeting clients, purchasing and selling assets, creating reports and financial forecasts and selecting optimum investments.
Related: What Is Investment Management?
What does a portfolio manager do?
A portfolio manager is responsible for creating and managing investment plans for their clients. They meet with clients to determine investment objectives and then work with financial analysts to investigate investment opportunities to achieve those objectives.
As a portfolio manager, you must:
- Stay up to date on the status of financial markets
- Be informed on current events
- Focus on the overall economic outlook
- Analyze market trends and developments
- Identify client investment goals and research ideal investment opportunities
- Work closely with financial analysts to determine securities for investment
- Manage a team of analysts
How to become a portfolio manager
It typically takes several years of working within the financial industry to qualify for a portfolio manager position. It requires experience, education and certification. Here are the steps to become a portfolio manager:
1. Earn a bachelor’s degree relevant to finance
Earn a bachelor’s degree with a major in finance or a related subject such as accounting or business. This will typically qualify you for junior analyst positions in the securities field.
Relevant courses include:
- Accounting
- Computer science
- Math
- Statistics
- Economics
- Data analysis
- Asset and risk management
- Business law
- Tax law
2. Obtain experience in the financial industry
One way to gain experience in this competitive field while still an undergraduate is to seek an internship at an investment firm. If you’re ready to enter the job market, entry-level jobs as a financial or research analyst will prepare you for an advanced position by training you on how to research and analyze data. Analysts usually work closely with portfolio managers and learn about portfolio management as they gain a solid overview of the financial industry.
Related: 12 Reasons To Work as an Investment Manager (Plus Tips)
3. Pursue a graduate degree in finance
As you start building your experience, enroll in a master’s degree program in finance, business administration or a related field such as economics. Many organizations require a master’s degree for senior financial analysts or portfolio managers. Some advanced degree programs offer stock market-specific courses.
4. Gain experience as an analyst
Portfolio managers typically start as financial analysts at either a junior or senior level. A master’s degree may immediately qualify you for a senior position. An investment analyst evaluates information on securities and assets to determine investment opportunities. A financial analyst expands on the investment analyst role, adding tasks such as budgeting, valuation, financial modeling, and forecasting.
Senior analysts produce investment reports and recommendations on certain securities under the direction of a portfolio manager. They may also supervise and direct the work of junior analysts.
Related: What Is a Financial Analyst?
4. Earn certification and licensure
Most employers require their portfolio managers to have financial analyst certification. The most common is the chartered financial analyst (CFA) credential offered by the CFA Institute. It is a highly specialized program focused on investment analysis that takes three years to complete. Financial analysts with a bachelor’s degree and four years of accepted work experience are eligible to sit for the three-exam series.
The Chartered Portfolio Manager (CPM) is a certification that requires at least three years of experience in active portfolio management and is another prominent credential. It is offered through a collaboration of the Academy of Certified Portfolio Managers and Columbia University to demonstrate expertise in valuation analysis, portfolio construction and risk management. The certification process requires a week onsite at Columbia University.
Depending on the assets you work with, you may be required to obtain a securities license with the Financial Industry Regulatory Authority (FINRA), the governing body for U.S.-based brokers and securities firms. You must be sponsored by your employer to take the qualifying exams. If you plan to manage assets over $25 million, you will be required to register with the U.S. Securities and Exchange Commission (SEC).
5. Join professional organizations or associations
Consider becoming an active member of a professional organization such as the International Association of Quantitative Finance (IAQF) or Portfolio Management Institute (PMI). This will provide opportunities for professional development and to grow your network. It will also give you opportunities to attend. Most professional organizations offer members-only resources, workshops, conferences, and other industry events.
Related: Q&A: What Is a Professional Organization?
6. Apply for a portfolio manager position
After gaining experience in the field, developing your skills, attaining necessary certifications and becoming familiar with many aspects of the industry, you are ready to apply for a position as a portfolio manager. This is an advanced position within an organization and every step you take over the course of your career can move you closer. Senior portfolio managers often report to the chief investment officer (CIO), providing a potential career path to an executive position. Once you apply for a position, hone your interviewing skills to provide the best opportunity for success.
Related: How To Prepare for a Promotion Interview
What is the salary of a portfolio manager?
The average base salary of a portfolio manager is $78,558 per year and will depend upon factors such as level of experience, the organization you work for, type of industry and job location. For example, larger companies will provide higher salaries than smaller firms and urban areas will offer more compensation than positions in suburbs or rural locations.
According to the U.S. Bureau of Labor Statistics, employment for portfolio and other financial managers is expected to grow by 17% by 2030, much faster than the average for all occupations.
What skills are necessary to become a portfolio manager?
A variety of skills are necessary for a portfolio manager to develop since the role requires the ability to manage both professional relationships and high-level financial investments. Here are some of the top skills portfolio managers will use frequently while performing their jobs.
Interpersonal communication
Interpersonal communication skills are necessary for any professional role. When dealing with significant assets and confidential financial information, a portfolio manager needs to connect deeply with their clients to build trust and clarify their client’s objectives and expectations.
Analytical thinking
Analytical thinking is important to consider risks and opportunities and determine the best solutions to meet individual clients’ needs. It will also help portfolio managers work more efficiently and productively.
Related: Analytical Skills: Definitions and Examples
Strategic thinking
Strategic thinking allows people to take numerous factors into account and make informed and calculated decisions. This skill is necessary for a portfolio manager to predict which investments will be worth pursuing and to evaluate risk versus potential returns.
Research skills
Portfolio managers do a great deal of predictive work such as scenario analysis and evaluation. They spend a significant amount of time doing market and industry research to make informed investment decisions.
Related: Research Skills: Definition and Examples
Emotional intelligence
Emotional intelligence is the ability to understand and manage your thoughts, feelings and reactions as well as that of others. A high level of emotional intelligence will allow portfolio managers to communicate more effectively, overcome challenges, make better decisions and manage stress.
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Traits
Some traits important for a portfolio manager to develop include:
- Decisiveness to make good decisions, take action and achieve desired results. Financial decisions must be made with clarity and understanding.
- Confidence to build trust and demonstrate competence with clients.
- Integrity to demonstrate honesty and ethical behavior.
- Handle pressure to maintain emotional control while dealing with stressful and unpredictable situations.
- Resilience to face problems and recover positively from challenges during times of stress and uncertainty.
