Pros and Cons of a Career as a Stock Trader
Stock trading is a fast-paced career that involves buying and selling stocks and other securities. Investigate the pros and cons of the career to decide if being a stock trader is right for you.
| Pros of a Stock Trader Career |
|---|
| Possibility of advancing to the highly paid position of financial manager after obtaining five years of experience ($115,000 median annual salary in 2014)* |
| Favorable job outlook (11% job growth from 2012-2022)* |
| Receive on-the-job training* |
| Can benefit from financial knowledge to increase personal net worth* |
| Cons of a Stock Broker Career |
|---|
| Pay is often commission based (usually earn a minimum salary)* |
| Stressful job (time constraints, dealing with a great deal of money, demanding manager and market fluctuations)* |
| May work shifts, weekends and evenings* |
| Jobs are concentrated in large metropolitan areas (New York, Chicago and Los Angeles)* |
Source: *U.S. Bureau of Labor Statistics.
Career Information
Job Description
Stock traders advise shareholders and manage clients' portfolios. Traders engage in buying and selling bonds, stocks, futures, hedge fund shares and commodities. They also seek out new business by contacting potential clients to discuss the financial services they offer. Conducting extensive research and making observations concerning the performance of financial markets and individual securities are also part of the job. Additionally, they keep up with the financials of various companies so that they can provide advice on acquisitions, mergers and public offerings.
Salary Information
Salary.com indicated that entry-level stock traders with 0-3 years of experience earned a median annual salary of around $46,000, as of 2015. More experienced traders with 3-5 years of experience earned a median annual salary of roughly $65,000, as of 2015. Generally, stock traders earn a minimum salary and the remainder of their salary is paid through commission and bonuses.
Employment Outlook
The U.S. Bureau of Labor Statistics (BLS) reported that the number of jobs for commodities, financial services and securities sales agents was anticipated to grow by 11% between 2012 and 2022 (www.bls.gov). Entry into this career field is often extremely competitive, but increased ownership of stocks and mutual funds could drive growth in the number of available positions for traders. Additionally, banks are offering more opportunities for people of average means to invest and trade stocks, thereby increasing the need for stock traders. However, individuals trading stocks on online sites, without the assistance of a professional trader, may counter growth.
What Are the Requirements?
A bachelor's degree in business, economics, accounting or finance is the typical requirement to obtain an entry-level position as a stock trader. Individuals who seek to advance or secure a higher-level position sometimes earn an MBA (Master of Business Administration), which is often a requirement to obtain higher-level positions with better pay. Once you obtain a position, an employer generally provides on-the-job training to help you understand how the firm operates.
Registration or Licensure
To obtain the requisite license, traders are required to pass a series of exams administered by FINRA (Financial Industry Regulatory Authority). FINRA is the largest independent securities regulator in the U.S. A candidate is either associated with or employed by a firm that is a FINRA member or a non-FINRA member organization. Generally, a candidate finds employment with a FINRA registered firm and completes on-the-job training. He or she then signs up to take the General Securities Representative exam, commonly referred to as the Series 7 exam, with the firm as their sponsor. Candidates can also take the exam without a sponsor or a regulator other than FINRA as sponsor. You may also be required to sit for the Uniform Securities Agent State Law Examination, also known as the Series 63 exam. Depending on the firm for which you work and the kind of trading activity you perform, you could be required to take and pass additional FINRA examinations to obtain licensure.
What Are Employers Looking For?
Employers are generally looking for candidates with a bachelor's degree and trading or accounting experience. If you don't have the required FINRA licensure, you'll be expected to pass the test(s) within a certain period of time, and some companies only hire candidates that have already passed the requisite FINRA exams. Although they don't paint a complete picture of the job market, the following job posts obtained from Monster.com and CareerBuilder.com in April 2012, can provide an idea of the skills employers are seeking.
- A trading group in New York City advertised for an equity trader. Candidate will receive systems mentoring and training. Candidates must pass the Series 56 exam, unless they've already passed the Series 7 Exam. They must also provide $3,500 to start trading (non-salaried position) and have excellent analytical, problem-solving, programming, computer and quantitative skills.
- A high-end wealth management company in Missouri sought a trade assistant to work with high-end clientele. Candidate must have knowledge of accounting and financial assets, as well as Excel and Quickbooks experience. Candidates who have passed FINRA Series 6 and Series 63 exams are preferred.
- An investment planning company in Cincinnati, OH, advertised for a securities trader with 1-3 years of experience who has passed the FINRA Series 7 exam and the Series 66 exam or Series 63 exam. A candidate must also pass the Series 53 and Series 24 exams within a year. The company prefers a candidate with a bachelor's degree in finance, marketing or business and an insurance license.
How to Stand out
Gain Experience
Schools could recommend that you gain experience through a co-op, summer job or internship before completing your degree. An internship can help you learn about the workings of the stock market, stock trading analytics and strategies in stock training. It could also provide the opportunity to operate the software used in stock trading and help you develop financial knowledge and devise your own stock trading strategies.
Another way to gain beneficial investment knowledge is by joining a stock trader's club while attending in university. Participating in a club of this nature is a fun way to gain an understanding of how the stock market and trading work. If your school does not have one, you may be able to start one.
Obtain Certification
According to the BLS, obtaining certification can enhance your professional reputation and employers often advise obtaining it. The Chartered Financial Analyst Institute (www.cfainstitute.org) offers Chartered Financial Analyst certification. To obtain it, you need a bachelor's degree and four years of experience working in the industry. You're also required to pass three exams that test your knowledge of portfolio management, asset valuation, corporate finance, financial markets, securities analysis, economics and accounting.
Alternative Careers
If you're interested in working in the financial sector, but are wary about working for commission, a career as a financial analyst could be a viable alternative. Financial analysts evaluate investment possibilities and provide individuals and companies with investment advice. Types of financial analysts include fund managers, portfolio managers, risk analysts and ratings analysts. Similar to stock traders, the typical entry-level educational requirement is a bachelor's degree. According to the BLS, financial analysts earned a median salary of about $76,000 in 2011. Employment for financial analysts was projected to increase 23% from 2010-2020, compared to 15% for a stock trader over the same decade.
While a stock trader helps clients invest and buy stocks or mutual funds, a real estate agent assists clients with renting, selling or purchasing homes. You can become a real estate agent with only a high school diploma, which equates to less schooling than if you were to become a stock trader. However, real estate sales agents must obtain licensure before practicing, which requires completion of real estate courses. The BLS reported that real estate agents earned a median annual salary of about $39,000 in 2011. Over the 2010-2020 decade, jobs for real estate agents were predicted to increase 11%, which is slightly slower than the anticipated job growth for stock traders.
