Future Risk

I started to think about managing future income risk after my sophomore year of college. Prior, to that I did not know what I wanted to study or what my aspirations were. I was an undeclared major for my first year at Purdue, and that gave me the time to experience different classes. I had decided that studying economics would be the best fit for me as I had planned on receiving an MBA in the future. Hence, I transferred to UIUC to pursue degrees in Economics and Statistics for in state tuition and its strong STEM and business programs. I did not go to UIUC from the beginning because I was rejected when I applied from high school.

The first organization I joined on campus was OTCR Consulting, this gave me the opportunity to be surrounded by some of the brightest minds at UIUC. Initially I though I would be interested in management consulting as a profession, but I realized I always though finance was interesting. For example, when I turned 18 I opened my first brokerage account and managed to increase the value of my portfolio by approximately 92% with 18 months.

Even though OTCR is a consulting organization, there are quite a few people who are going into finance. I was able to learn more about investment banking, through these people. As a result, I became interested in investment banking and I am now pursuing a career in investment banking.

To pursue this goal, I had to intern in finance to learn the basics, as I am not a finance major. Last summer, I was a corporate finance intern for one of the biggest conglomerates in India. This gave me the background experience I needed before breaking into investment banking.

However, since breaking into investment banking is quite difficult I do have a contingency plan. My contingency plan is to work in asset management or private wealth management. However, I would rather choose to go to a top masters program and apply as an associate.

I do not have a sibling but I have had the opportunity to talk to some bankers who graduated in 2008. As we all know in 2008 there was a financial crisis, incoming graduates had a tough time breaking into jobs due to the overall pessimistic outlook of the economy. However, I learned that to truly be successful you need to be determined and confident.

The reason that I am so interested in becoming an investment banker is due to thrill on working on million and billion dollar deals and the fact that you are paid based on performance. This would motivate me to do my best and help me retain my strong work ethic. Investment bankers usually have an average base salary of around 60K to 85K for a first year analyst but make the bulk of their money in year end bonuses. This would be very substantial in paying my student loans off. I would aim to pay them off as soon as possible due to the compounded annual interest.


As a result, after sophomore year I understood the severity of managing my future risk. This has paved the way for what internships I am looking for and classes that I am taking to better help me prepare for a job in investment banking.

Comments

  1. Professor ArvanOctober 21, 2017 at 11:47 AM

    Some of your story I didn't fully understand. One point is about where you want to to locate. Is that India or the U.S. or does that matter? Another point is on the place where you were an intern last summer. Is that a possibility for a job after graduation or not? Then, too, I didn't understand whether getting a job at an asset management company is easy to do or not.

    So let me sketch a different way to think about contingency, especially if your plan A and plan B both don't pan out. This would be to stretch out your undergraduate degree by a semester so you could get a different internship in summer 2018, one at a company where you might find employment thereafter. I am not saying this is a good thing to do. I am just expressing some concern that even with your contingency plan, you will be exposed to a lot of downside risk.

    Also, while I can understand the thrill of working in a business that generates lots of income, I wonder if after a fashion that loses its attractiveness in itself and if then the nature of the work matters. For example, a lot of NGO's need a good business manager to keep them running smoothly. That sort of work surely wouldn't pay as much. But supporting the mission of the NGO might be quite rewarding. It is probably not the sort of thing you would do immediately after college. But it might be what you move into if you do succeed in investment banking and then accumulate a nice nest egg for yourself.

    The students who graduated in 2009 probably had it worse than those who graduated in 2008, but it was definitely bad in both years. It points to that the sector itself is vulnerable over the business cycle. I'm not sure of other jobs that aren't so vulnerable. Given that the way to self- insure over the business cycle is to save substantially during boom times. Not everyone has the discipline to do that. But if you do, it can provide a lot of added security.

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    Replies
    1. Francis Edgeworth Econ 490 Fall 2017October 26, 2017 at 10:48 PM

      Basically my contingency plan is to relocate to India for a year or two, if I do not get a position in IB here. I will then move back to the U.S. after my two years. I have heard that is is easier to break into a bulge bracket in India due to its location.

      Its funny you mention stretching out my college career, I have also seriously thought about the idea. I plan to take up the business minor in that case to add value to my degree.

      I am quite passionate about food, so I might look into doing some philanthropic work, if possible.

      I hope to notify you in the near future of my plans.

      Delete
  2. Milton Friedman Econ 490 fall 2017October 22, 2017 at 6:36 PM

    How does Purdue's STEM and business rank compared to UIUC? Is it that much of a difference that it is worth all the trouble of transferring just for these programs, or did you want to come to UIUC all along for the in-state tuition and that was the main factor? Also, being able to earn money when you just started seems impressive. It sounded like you started this account before you learned much about finance either, as you said you are not in finance and are just learning from other students?

    ReplyDelete
  3. John Maynard Keynes Econ 490 fall 2017October 23, 2017 at 7:20 PM

    Do you view investment banking as a safe career? I do not a lot about it, but I thought a lot of that was being taken over by programs. Do you know what the investment banking world will look like a decade from now? Where were you living for your internship? Was it in India or did they have a office in the United States?

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