Most workers in this industry hold associate or bachelor’s degrees. Employment is expected to grow as a result of increasing investment in securities and commodities, along with a growing need for investment advice. The high earnings of successful securities sales agents and investment bankers will result in keen competition for these positions.
Securities contracts which give their owner the right to an asset or the right to purchase an asset in the future. Companies sell these financial instruments to raise money from investors to finance new business operations or to improve or expand existing ones. Investors purchase these instruments with the goal of earning money by earning dividends, interest, executing the agreement, or selling the security at a higher price.
The securities industry is made up of a variety of firms and organizations that structure investments, bring together buyers and sellers of securities and commodities, manage investments, and offer financial advice. The products provided by the industry are called securities. The most basic types of security are stocks and bonds, which provide capital to finance corporations. Stocks entitle their holders to partial ownership of a company, whereas bonds are a form of debt that a company pays back with interest. Investors purchase stocks and bonds in order to earn money in the form of dividends or interest, or to sell the issues to other investors at a higher price.
Another type of security is called a derivative, which is a contract to purchase an asset at a specified future date. There are two basic types of derivatives: options and futures. An investor who holds an option has a contractual right to purchase an asset at a set price on a specified date, but is not required to do so. A futures contract is an agreement to purchase an asset at a set price and date with no option to decline. Commodities, for example, corn, wheat, and pork bellies, are often bought and sold in this way, and are among the best-known derivatives. Other goods sold on the derivatives market include foreign currencies, precious metals, oil and natural gas, and electricity. Buyers purchase derivatives with the hope that the price of the asset involved will be higher than the agreed price when the contract matures.
Mutual funds and exchange traded funds (ETFs) are also common investments. In both cases, the issuing firm owns a large portfolio of other securities which, on average, are expected to increase in value. In the case of mutual funds, this portfolio is typically managed by a team of financial analysts who determine which stocks to buy and sell; however, some mutual funds are not actively managed and are instead designed to track a benchmark index, such as the Standard and Poor’s 500 or Dow Jones Industrial Average. Exchange traded funds are almost always designed to replicate a stock index. ETFs can be traded like stocks, unlike mutual funds. Because both of these types of securities require management, the companies who issue them charge a fee. Investors are willing to pay this fee because mutual funds and ETFs have a lower level of risk than other securities.
Besides selling securities, segments of the securities industry also sell advisory services. Investment banks, for example, help companies to plan stock or bond issues and sell them to investors. Securities and commodities exchanges, on the other hand, provide forums for buyers and sellers to trade securities. Private banks and investment advisories help individual investors to determine how to invest their money.
[ Excerpted from Bureau of Labor Statistics, U.S. Department of Labor, Career Guide to Industries, 2008-09 Edition - Securities, Commodities, Investments ]