Difference between trading and investment banking?

Ivy_Grad
Sat, 19 Feb 2005 07:43:47 +0000

Frankly its easy for people to say things like “traders run investment banks now” - and while I don’t disagree that there has definitely been a power shift over the years at i-banks from traditional banking divisions (M&A) to the trading divisions (equities / FI), there needs to be a little perspective here.

Fact is, the path to become a top trader at any bulge bracket firm is largely unstructured and depends a lot on timing, luck, skill and opportunity - not to mention for every trader there are dozens of bankers (i.e. way fewer spots, and therefore, opportunities). This is not to say that the top prop traders at the big houses don’t pull down massive bank - they absolutely do - my point is that this is a very highly specialized and relatively small group of people who are playing at the very top of their game on a global basis.

In sum, if a person wants to get some solid finance experience coming out of undergrad, its hard to beat a traditional i-banking analyst position in terms of flexibility in career path (i.e. post-analyst options - MBA, private equity, VCs, etc.). At the same time, if you are a naturally born trader and you know that’s what you want to do for your long term career - by all means go for it, but I’d argue that people coming to this thread who ask questions like “what’s the difference between S&T vs. i-banking” haven’t really done enough due diligence to know that they want to do any one particular thing straight off the bat and stick with it over the long haul (though there may be a few out there).