Cash-rich businesses in technology, banking and insurance (among many other sectors) earn their impressive incomes not only from the services and products they sell but also the interest and capital gains they receive from their investment portfolios. Managing these cash flows is not a passive element of running the business but an integral part of a business’s financial strategies. Job candidates with a Master of Business Administration (MBA) with a Concentration in Finance will head to the front of the line for openings to manage these securities investments.
Maximizing Return, Managing Risk and Diversification
The end goal of securities investment strategies is to create portfolios that maximize returns for shareholders. The concept of managing risk is essential to securities investments. Contrary to popular belief, however, managing risk is not only for risk aversion. Through studying securities investments in a specialized program like the Southeastern Oklahoma State University (Southeastern) 100% online finance MBA, finance professionals know that avoiding risk will limit financial rewards and stagnate the opportunities that shareholders and other stakeholders expect.
Instead, managing risk should account for the goals and available funds of the investor. Conservative companies may not want to risk their principal for higher potential earnings. Fund managers must focus on investments that protect principal funds. Companies that seek higher returns will take on higher potential risk, understanding that they could lose the interest and capital gains they have already earned as well as the primary funds they invested.
Diversification is a strategy that fund managers use to mitigate the risk that a company takes on. Even with risk-tolerant companies, Modern Portfolio Theory (MPT) advocates diversification by investing in a range of security types, industries and maturity dates. With MPT, investors can take on additional risk without risking all their funds.
Constraints and Ethics
When evaluating securities investment opportunities, investors and analysts must take a holistic approach. Various constraints will affect each opportunity. Analysts must recognize and respect industry-specific (institutional) constraints. Such constraints may come from laws and regulations upheld by agencies like the U.S. Securities and Exchange Commission (SEC). Ethical, social and environmental concerns and broader shifts in public opinion and discourse may also inform investment constraints, as with the increasing use of environmental, social and governance (ESG) metrics to evaluate investment risk and opportunity.
For example, legal constraints could prohibit investing in companies that employ children or dump chemicals into the oceans. Even when other countries allow those practices, ethical parameters can dominate and prevent a socially responsible company from investing in areas where these questionable practices are legal. A company that makes unethical investments will also perform poorly as measured by ESG metrics, which may lead to less investment in that company by outside parties.
Resources and the Evolving Securities Market
A wealth of resources exists for aspiring investors and finance industry professionals. Quality finance MBA programs provide invaluable, in-depth securities market studies. Organizations and agencies like the SEC, the Securities Industry and Financial Markets Association Foundation and the North American Securities Administrators Association also offer valuable resources, programs and projects designed to help educate the public on financial markets and investments.
These resources and educational opportunities are essential. The landscape of the securities market changes constantly, so professionals must keep current on trends and developments in the field. For instance, as baby boomers continue to retire, there is a renewed focus on securities investment for individuals. According to the U.S. Bureau of Labor Statistics, this will increase the need for personal financial advisors, driving rapid job growth in the field.
Plus, fintech apps are providing broader access to securities investment opportunities, leading to an unprecedented democratization of the market. Wider public participation in securities investments impacts and drives the market in new ways that finance professionals of all types need to understand and respond to effectively.
Further, the increasing emphasis on ESG performance adds another layer of analysis and consideration to savvy investment practices. Focused “impact investing” is a related development gaining popularity — a strategy targeting investment opportunities that can make a positive social and environmental impact while maintaining a high financial return for stakeholders.
Securities investments are critical to the success of companies and private clients alike; securities managers and directors frequently oversee millions (even billions) of dollars. Given this, finance professionals must become experts in the modern securities market and emerging investment strategies to maintain a competitive advantage. Professionals can gain this expertise through Southeastern’s finance MBA coursework, covering topics like securities investments, financial institutions and fintech.
Learn more about Southeastern’s online MBA with a Concentration in Finance program.