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Sunday, 4 October 2015

Impacts of crude oil on the economy

What is Crude oil?

Crude oil is a naturally occurring substance found in certain rock formations in the earth. It is a dark and sticky liquid classified as a hydrocarbon, which is highly flammable and burned to create energy.

Why crude oil is crucial engine for every economy in the world?

Crude oil is the most important natural resource for every industrialized nation. It has become the world's most important source of energy since the mid-1950s. Refining crude oil is so important in our society, there are following list of products that come from crude oil:

Petroleum gas - used for heating, cooking, making plastics
Naphtha or Ligroin - intermediate that will be further processed to make gasoline
Gasoline - motor fuel
Kerosene - fuel for jet engines and tractors; starting material for making other products
Gas oil or Diesel distillate - used for diesel fuel and heating oil; starting material for making other products
Lubricating oil - used for motor oil, grease, other lubricants
Heavy gas or Fuel oil - used for industrial fuel; starting material for making other products
Residuals - coke, asphalt, tar, waxes; starting material for making other products

What is Chronology of crude oil prices?

From 1999 till mid-2008, the price of oil rose significantly. It was explained by the rising oil demand in countries like China and India

In the middle of the financial crisis of 2007–2008, the price of oil underwent a significant decrease after the record peak of US$145

It reached in July 2008. On December 23, 2008, West Texas Intermediate (WTI) crude oil spot price fell to US$30.28 a barrel,

The lowest since the financial crisis of 2007–2010 began. The price sharply rebounded after the crisis and rose to US$82 a barrel

In 2009. On 31 January 2011, the Brent price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt.

For about three and half years the price largely remained in the $90–$120 range. In the middle of 2014, price started declining due to

a. A significant increase in oil production in USA, and declining demand in the emerging countries. By January 2015 the price of

b. Benchmark crude oil, both Brent and West Texas Intermediate (WTI) reached below $50, with vanishing spread.

c. A record dip below $44 for WTI (with Brent near $54) was reached at mid-March 2015. The WTI price increased in the $60 (WTI) and

d. $65 (Brent) region in the following months. Oil prices decreased to a six-year low $38 on Monday, August 24, 2015.

Who are major suppliers and regulators for crude oil in the world?

According to IEA top 10 oil producer countries produced over 64 % of the world oil production in 2012. The top oil producers in 2012 were: Russia 544 Mt (13 %), Saudi Arabia 520 Mt (13 %), United States387 Mt (9 %), China 206 Mt (5%), Iran 186 Mt (4 %), Canada 182 Mt (4 %), United Arab Emirates 163 Mt (4 %), Venezuela 162 Mt (4 %), Kuwait 152 Mt (4 %) and Iraq 148 Mt (4 %). In 2012 total oil production was 4,142 Mt. In 2011 the world oil production was 4,011 Mt demonstrating an annually rising trend in oil production.

In 1960, A regulator The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela who control the crude oil prices and other related production regulations of member countries. OPEC member countries produce about 40 percent of the world's crude oil. Equally important to global prices, OPEC's oil exports represent about 60 percent of the total petroleum traded internationally. Rest are non-OPEC production centers that include North America, regions of the former Soviet Union, and the North Sea.

How India is influenced/ impacted by crude oil prices?

First thing to observe is that India is one of the largest oil consumer (4th after US, China & Japan) importing majority of it from Middle East countries (members of OPEC). India’s growth story hovers around the import of oil as India imports 70% of its crude requirements. India imports more than two- thirds of its requirement, which constitutes around 30 percent of total imports. Any negative change in the crude oil price has an immediate positive impact on the increment in the GDP and IIP. There are following benefits India will have with falling in prices :-

a. Falling crude prices is certainly a blessing for the economy as it helps macro-economic management (both budget and fiscal) by improving macro fundamentals (inflation, fiscal deficit and current account deficit).

b. Adding to that the fall in international oil prices will reduce subsidies that help sustain the domestic prices of oil products (LPG, kerosene)

c. lower crude price will surely facilitate room to the Reserve Bank of India in adopting growth-centric approach while reviewing monetary policy.

d. A one-dollar fall in the price of oil saves the country about 40 billion rupees.

e. Research report says that a 10 percent decline in oil prices could reduce retail inflation (Consumer Price Index-based inflation) by around 0.2 percent and push up the gross domestic product (GDP) growth by 0.3 percent.

f. Helped by a decline in under-recoveries, better refining margins and expansion of marketing margins.

Why crude oil prices are falling down since 2014?

This a complicated question, but it boils down to the simple economics of supply and demand. Oil prices tumbled to a six-year low, driven by renewed fears of oversupply and a surging U.S. dollar. Crude prices were also weighed down amid U.S. nuclear deal with Tehran, which would allow more Iranian oil exports into an already oversupplied global oil market. This deal would remove Western sanctions against Tehran and investors fear it could affect a global oil market already facing oversupply.

United States domestic production has nearly doubled over the last six years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices. Canadian and Iraqi oil production and exports are rising year after year. Even the Russians, with all their economic problems, manage to keep pumping.

On the demand side, the economies of Europe and developing countries are weakening and vehicles are becoming more energy-efficient. So demand for fuel is lagging a bit. China's recent devaluation of its currency suggests the economy of the world's biggest oil importer may be worse off than expected.

How US Dollar impacting to Crude oil markets ?

US Dollar is currency of international trade, Large majority of global oil is traded in U.S. dollars, and the volatility of that currency has tremendous influence on the real price of oil. Any weakness in the value of the USD against other currencies increases the purchasing power of countries.

There is a strong negative correlation between the prices of crude oil and USD. The negative correlation was particularly sustained after financial crisis of 2009, as the global economy began to emerge from deep recession and economic stimulus provided a wave of cheap money,

A weak dollar also compelled OPEC countries to demand higher price for oil to protect their dollar income. The US dollar plays a major role in the price movements of commodities such as crude oil and gold . As commodities trade globally, often using the US dollar as a medium, price movements in the US dollar have important consequences.

- Bharka Bhasin

Tuesday, 8 September 2015

TAX

MISTAKES TO BE AVOIDED WHILE FILING AN INCOME TAX RETURN

Unknown 12:07:00

1. Forget Sending ITR V to Income Tax Department

Every Tax Payer is required to send a duly signed copy of ITR V form to Income Tax department within 120 days of e filing an Income Tax Return at “Income Tax Department – CPC, Post Bag No. 1, Electronic City Post Office, Banglore – 560200, Karnataka” by regular Indian Post or Speed Post, only.

However where an Income Tax Return is filed using Digital Signatures (DSC) or Verified through Aadhar Number / Mobile OTP or Logged in through Net Banking, in such case ITR V is not required to be send to Income Tax Department.
Nearly 10% of Tax payers forget sending ITR V every year.

From Assessment Year 2015-16 , Income Tax Department has introduced a new verification system by which an assessee is not required to send a duly signed copy of ITR V form to Income Tax Department.2. Incorrect Bank Account Number and IFSC code

Bank Account Number entered in ITR shall not be less than 9 digits in any case and an accurate IFSC code should be specified, otherwise it may delay your Income Tax Refund.3. Incorrect claim of TDS

Every assessee shall enter TDS amount after due reconciliation of Form 16 / 16A with Form 26 AS, otherwise it may cost you to pay differential Income Tax along with interest @ 1 % per month or part of month.4. Filing ITR without taking effect of Interest Payable under section 234A, 234B and 234C

It is mandatory for every assessee to pay interest under section 234B and 234C which relates to the non payment or lesser payment of Advance Income Tax than the amount required to be paid as per section 208 of Income Tax Act ‘1961.
I found some assessee’s filing Income Tax returns after the expiry of due date without the payment of Interest under section 234A with an excuse that I delayed just a single day. All those assessee’s have to understand that the interest payable under section 234A,234B & 234C is payable @1% per month or part of month , means the interest @ 1% is payable even for the delay of single day.

Interest under section 234A would be leviable for the Assessment Year on the assessee if he delayed in furnishing an Income Tax return beyond 31 August 2015.5. Selecting Incorrect ITR form

Before filing of Income Tax Return, as assessee should understand that which ITR form is applicable to the source(s) of Income earned by him during the relevant assessment year.
An assessee should keep one thing in mind that the ITR forms may change on year to year basis.
For Instance:

ITR 1 form is useful only for an Individual assessee having Income from Salary/Pension, One House Property, Other Sources (other than lottery and race horses).
ITR 2 form is useful only for an Individual as well as HUF assessee having Income from Salary/Pension, House Property, Capital Gain and Other Sources and also for assessee having foreign assets.
ITR 2A form is useful only for an Individual as well as HUF assessee having Income from Salary/Pension, House Property and Other Sources and not having foreign assets.

6. Intimation and Rectification

Upon successful filing of Income Tax Return , the same will processed by Income Tax Department and an intimation u/s 143(1) is generated which shows the comparison of details of Income and Tax thereon filed by the assessee in the return form and the details processed by the department .
If the details mentioned in the intimation u/s 143(1) confirms to the return filed then no further action is required. However if there is any deviation, then a rectification application u/s 154 can be filed by the assessee to rectify the mistakes apparent from record within the period of 4 years from the end of financial year in which the order sought to be amended was passed.
Online rectification is also possible.
Don’t forget to check Intimation after filing your Income Tax Return which will clear that you need to file rectification application or not.7. Revising the late filed Income Tax Return

In accordance with the provision of Section 139(5) of Income Tax Act’1961, only the return filed under section 139(1) i.e. ITR filed within the prescribed date or the return filed in time can only be revised.
This mistake is possible only if the Income declared in Income Tax Return is less than Rs.5,00,000 and return is filed manually.8. Foreign Assets, Bank Account, Aadhar Number and Passport Number

New Income Tax Return forms for the Assessment Year 2015-2016 have been released by the Income Tax Department on 22 June 2015 with some new requirements that are mandatorily required to be filled by an assessee (if applicable), some of those are:

Aadhar Number (if held)
Passport Number (if held)
Details of all bank accounts held in India at anytime during the previous year (except dormant account)
Details of Foreign Assets and Income from any source outside India.

9. Incorrect information in Personal Information Schedule

Many assessee found to have fill incorrect TAN, Email Address, Mobile Number, Date of Birth & Residential Status,
An assessee should understand the fact that:

Incorrect TAN: Will not allow him to claim the Tax Deducted at source.
Incorrect E mail Address: Will result in non receipt of all intimations from CPC and other communications.
Incorrect Mobile No.: Will result in non receipt of SMS based Communication.
Incorrect Date of Birth: Will result in Computation of higher taxes in case of senior citizens.
Incorrect Residential Status: Will result in Computation of higher taxes.
Incorrect Aadhar no.: Will not enable Aadhar updation and EVC verification.

10. Excess deduction claimed or Deduction claimed twice

Many assessee claim excess deductions, specifically under section 80,80CCC & 80CCD(1) , an assessee should understand the fact the the maximum amount of deduction available under section 80C,80CCC and 80CCD(1) in aggregate cannot exceeds Rs.1,50,000.
At the same time many tax payers claim deduction under section 80G in excess by considering it under 100% eligible donation.11. Claiming Tax without actual payment of Self Assessment Tax

Some assessee claim Income Tax paid without the actual payment of Income Tax , it may make an assessee an ‘Assessee in Default’ which may result in payment of interest @ 1% per month or part of month under section 220 & penalty under section 221 at an amount as determined by Assessing Officer.
At the same time, the Intimation received under section in reSpect of that return will create the demand for unpaid Income Tax along with Interest under section 234B & 234C (if applicable).

12. Leaving columns blank in ITR FORMS

Every taxpayer is required to fill all column of ITR form applicable on him (other than those specified optional)
If all the annexure, columns and statements are not duly filled in an ITR form then an Income Tax Return may be considered as defective return under section 139(9) and might be rejected by Assessing Officer.
An assessee should understand that the deduction under section 80G in respect of Donation is available only if all the requisites field in the schedule are duly filled in and the claim of Taxes paid and TDS is not available to the tax payer if he fails to furnish the complete details of it .
Author can be reached at:
ANKIT GUPTA
Ankit@taxzippy.com

law

ONE PERSON COMPANY AND HOW IT IS REGISTERED?

Unknown 12:04:00

STEPS OF GETTING IT REGISTERED

Step 1: Digital Signature Certificate

Digital signature certificate must be obtained for the main Director of the One Person Company. Digital signature certificate can be obtained by submitting the signed digital signature application form along self attested copies of PAN card and address proof like drivers license, aadhar card, electricity bill, etc., A digital signature certificate can be be obtained in 1 to 2 working days.

Step 2: Prepare Incorporation Documents

To file for incorporation of One Person Company, the following documents are required.List of documents required for filing Form INC-29:

Memorandum of Association
Articles of Association
Declaration
Affidavit
Proof of registered office address
Copies of utility bill of registered office address not more than 2 months old
Identity and address proof of the main Director
Identify and address proof of the nominee Director

Step 3: File for Incorporation

Once the above documents and form INC-29 are prepared, digital signature of a financial professional (CA/CS/CWA/Lawyer) must be affixed on the INC-29 form along with the digital signature of the main Director. Form INC-29 is now ready to be filed with the MCA.

Step 4: One Person Company Registered

If the Form INC-29 and the attached documents are in conformance with Companies Act, 2013, then the One Person Company would be registered and Certificate of Incorporation would be issued by the Registrar. In case there are errors with the INC-29 filing, then the Registrar would request a re-submission of form INC-29 with changes. The form can be resubmitted within 15 days for reprocessing by the Registrar.

CA SAYAM RASTOGI

thingstoknow

Some unusual ways of saving Income Tax in India not known to many people

Unknown 12:00:00

HUF CREATION: HUF is considered as a separate entity which has its own PAN No and is therefore taxed separately. This helps to separate tax obligations of an individual from that of his family. Tax slabs of HUF are same as that of an individual, and qualify for all the tax benefits under Section 80C, 80D, 80G, 80L and so on. It also enjoys exemptions under Section 54 and 54F with respect to capital gains. The HUF is also entitled to claim deduction for interest on self occupied house property of Rs. 2, 00,000 in a year as per section 24 of the Income-tax Act.

Stamp Duty and Registration Charges for a home: Many people don't know that the amount you pay as stamp duty when you buy a house and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house. An important point to note here is that you should be in possession of the house if you want to claim these deductions. So in case of under-construction properties, you lose out on claiming this deduction as per the income tax. Even Interest payment to friends and relatives can be claimed u/s 24 but only against a certificate received from them. In the absence of the certificate, you would not be eligible for the deduction. The recipient of interest income who issues the certificate is liable to pay tax on the interest income that he receives. As far as the principal payments are concerned, they would not qualify for tax benefit as loans only from notified institutions and banks are eligible for such deductions.

Get deduction for rent even without HRA: -Under Section 80GG, you can claim deduction of the rent paid even if you don’t get HRA. However not many people are aware of this deduction. If you are not being paid any HRA or don’t have any housing benefit from employer. The deduction shall be the least of the following:
1) Rent paid minus 10 percent the adjusted total income.
2) Rs 2,000 per month.
3) 25 percent of the adjusted total income.
Note: If you are staying with your parents, you can pay them rent. If they don’t have significant income, it would mean you save tax on rent paid and even your parent’s income does not cross the tax limits, which is a win-win situation.

Declare your losses in tax return to save tax in future:-Income Tax law allows you to set off losses in one against gains in another, depending upon the various criteria. Also if you have only losses this year and no profits, you can show this loss in your tax returns and carry forward and set-off this loss against any future profits for next 8 yrs.

Buy House with Parent or Siblings as joint-owners: - You can have your spouse/parent/siblings as co-owner and all the co-owners can claims the tax deductions of 1 lacs for principal and 2 lacs for interest part. So if you take a housing loan with your siblings as co-owner of property and co-Borrower of loan, the loan amount interest and principle paid will be available for tax exemption in ratio of your loan amount.
Note: The co-owner who falls in the higher tax bracket should hold a higher proportion of home loan to make sure that the tax benefits are maximized.

Clubbing income of disabled child: - If you invest in the name of your spouse or minor child, the income from the investment will be clubbed with your income under Sec 64 and taxed accordingly. However, if the child is disabled, the income from investments made in his name will not be clubbed with the income of parents. Parents can use this provision to invest in taxable instruments like fixed deposits and debt funds.

Monday, 7 September 2015

thingstoknow

The big Greek tragedy

Sainath Gupta 18:42:00

Lets start with explaining what exactly is European Union(E.U.) and European Central Bank(E.C.B). To understand that we need to know what are monetary and fiscal policies.

Monetary Policies are the policies which are related with actions of central bank of a country i.e it determines the rates at which banks lend money, banks borrow money from central bank and intrest rates banks pay to depositors.

Fiscal Policies are what we call budgets of governments. Fiscal policies determine how much each country spends on different industries and areas of development.

(Generally a deficit budget is considered good for a country looking to develop.)

Now lets get back to EU. After the devastation of World War II, the fastest way to develop Europe was to get down trade barriers. This was done by building a centralised unit (E.C.B) which controlled Monetary policies of whole Euro Area(common currency i.e, Euro was introduced in 1999).

IT IS TO BE NOTED THAT FISCAL POLICIES WERE UPTO INDIVIDUAL GOVERNMENTS (which allowed them to borrow according to own wishes)

So EU had members which were economically very strong e.g, Germany. Inclusion of strong economies gave weaker economies greater access to credit which they cannot repay unless their economy grows and expands rapidly. However, this is not what happened with Greece, their economy has shrunk 25% in last 5 years and it has loans, about 180% of their GDP.

The money which should have been used for development of Greece has been used by political parties for own benefit and paying out pensions.

Now how did EU allow Greece to borrow so much?

After the 2008 collapse of Wall Street(Lehman brothers and others) credit was tightened and all the loans Greece was taking to pay back previous loans were suddenly stopped . In 2009 Greece announced that it had been understating its figures .

In 2010, Greece gave in to inevitable and was going towards bankruptcy. E.C.B bailed them out during that period with conditions of cutting spending and following strict borrowing measures. However this did not go as planned as lower spending meant less tax collections as incomes were dropping .

This has brought us to the time when Syriza is elected as Government. They were brought to power on promises of getting Greece out of debt and improving its position.

Greece government has publically voiced opinion of not getting a good deal out of negotiatons with creditors ( saying that acceptance of terms would mean disaster for Greece) and wants to opt out of EU and go back to its own currency(Drachma). This would mean heavy devaluation of the Drachma and trust on the Euro would be lifted. Euro zone would not be stable (but in reality it never was), and it could cause chain reactions to other countries in Euro Zone (as all the debt has been interlinked to each other in Euro zone)

Hence it called on referendum and urged people to vote NO. (referendum was on whether to accept bailout and continue to be part of euro zone and accept austerity measures) and Greek people voted NO.

However when Greece defaulted , Greece wanted another deal with creditors.

The option when Greek people voted NO was that government would start paying expenses with IOU's ( as secondary currency that would be worthless out of Greece) . Another option is converting all Euro debt to Drachma , which would allow Greece to pay debts with depriciated currency.

The first option is that Greece can do without leaving Euro zone.

In principle, leaving Euro Zone and devaluation of currency would mean improved trade and demand and attractive tourism. However if past is any indication , it has already tried to cut wages without much positive results.

Additionally leaving Euro Zone would mean that Greece would have to pay higher interest rates .

Whether Greek Govt. accepts bailout or leaves Euro zone is upto them.

By: Karanvir Singh

Wednesday, 2 September 2015

knowledge

Lifestyle of Investment Banker

Unknown 17:16:00

Investment Banker Lifestyle – You must have probably heard a lot about investment banking and would have a fair idea of what an investment banker does and also wish to be one. But how well do you understand the investment banker lifestyle? Wouldn’t it be great if you have a clear picture about what your life will be as an investment banker so you are well prepared to make that as your career? That’s where this article would guide you.

An Investment banker life is considered to have long working hours, working on weekends, lot of hard work and little sleep. Let’s have a closer look at it. This write up on investment banker life will help you know the following

Why become an Investment bankers?

I would not be wrong to say that the candidates today are quite mesmerized by the image of an investment banker. The image here I am referring to is the one, where we see even young investment bankers dropping out of quite expensive cars wearing polished suits. Seldom do people realize that such investment bankers put in a lot of hard work, working under stress situations and round the clock for months.

Earn lot of money

There is no doubt about this particular reason being the biggest motivating factor for people to get into investment banking.

The salaries and bonuses one could earn are extremely luring which would get you in his career and motivates you to stay in. The fat salary and the bonuses which could go up to three to five time the salary makes up for all the hard work you put in.

There are a few career options which give opportunities to earn money as investment banking does. Having said so if we have to compare it with entrepreneurship it could be on similar lines. But again the risks involved are greater than working as an investment banker. Hence, investment banking can be a safe bet when it comes to compensation. Especially considering the amount of bonus an investment banker gets for the slogging is quite worth it.

The lifestyle

Many a times it is the lifestyle this job affords that some get attracted towards. With high salaries, you could very well have enough money to visit luxury hotels in exotic islands, gobble on some fine food and wine. Several people enjoy being able to live a rich person’s routine life such as attending art exhibitions, hang out and spend time with the fat cats.

Status symbol

Being an Investment Banker, you are attached with a tag of being a financial wizard and a symbol of financial success. This tag brings in a lot of prestige and gathers a lot of attention when anything in finance is discussed. Your opinion on investments, loans, and mortgages will become important to all your near and dear ones.

Passion for finance

There are some people who are motivated to get into the field of finance from a young age. They have a sharp sense of finance, who have analytical mind from the start and are the ones that can digest information quickly. Such usually get into investment banking as soon as they complete their financial degrees in the university.

Higher Expectations

What I am referring here is a kind of background and surrounding they come from which urge people to get into investment banking. Most of their family members and friends belong to hedge funds, investment banking and hence are motivated to follow suit.

Career foundation skills

Getting into investment banking gives you loads of opportunities hone your PowerPoint presentation, communication and Excel skills. There are other skills that you learn would teach you how to work and survive in this difficult and challenging industry. Also, you get to add quite a few impressive points in the resume. Many people become investment bankers to get the most out of this profession, learn as much as possible and leave before it’s too late. An exit from investment banking may open up new doors for you in finance careers such as private equity, venture capital, and hedge funds.

Intelligent People

Another attraction for people to get into investment banking is that you get to work with some intelligent minds who have sharp brains and are driven individuals to prove their financial abilities.

Learning is intense and you get to work with some of the brightest and most demanding people on Wall Street. You would be exposed to top business leaders and know how they think, how they create strategies and the thought processes behind their decisions.

Investment Banker Lifestyle

Truly speaking there is no “typical day” for an investment banker as your tasks will vary every day. You can be expected to prepare financial models (project how much will the company grow in the next 85 years), preparing pitch books (why you should sell your company to ABC Corp. at $20/share), working on deal memorandum and everything else that goes into a deal.

Have a look at the below infographics on Investment Banker Lifestyle

Myths and Facts of investment banking

Myth #1: Investment Banking is a very dazzling industry, and my work will be full of handing demanding transactions and deals.

Truth: Don’t expect this to be the true especially at the analyst or associate level. The tasks would be the ones that come down from the senior managers and would be basic grunt work. Although, it does pay back when you handle much more meaningful position in the company, higher up the ladder.

Myth #2: The job gets better with time and position.

Analysts spend quite a lot of time in getting control of the life in investment banking w.r.t the long hours and random work assigned by the seniors. With this, they gain experience and as time goes they are assisted by various other interns and fresh recruits who share the work responsibility.

Truth: It is not simple as it may seem. You need to spend some time to figure out who would be the best to assign a specific work. Also, you would be responsible for the work they perform and involves risk.

Myth #3: Investment Banking is not as hectic as people fuss about.

Truth: Strength of mind and character and competition are vital elements to Investment banking. And competition exists because there are losers and people in investment banking are resolute to make you one. The politics and competitive scenario is not everyone’s cup of tea and you need to very well survive, pour in your sweat and tears if you want to earn that heavy salary.

Myth #4: Advanced Mathematics skill is a must

Truth: Majority of the stuff you do in investment banking is going to be simple in terms of the mathematical skills you use. Being an analyst or even as an associate you would be spending most of the time in administrative kind of work. Even in case you fall into some technical group you would spending time on qualitative tasks rather than number crunching.

Myth #5: Investment banking is only for males

Truth: this cannot be regarded as a complete myth as Investment banking has been male dominated. The ratio is such that on an average there is around 1 in a 4 female investment banker and accepting the fact that this is substantial enough the gender discrepancy is decreasing day by day. It gives us enough positive sign that things are going to change for the better.

The Downsides of an investment banker’s life

Long working hours

If you are someone who wants to work in regular office hours and have a social life a career in investment banking is not for you. Want to know why?
At bulge bracket banks, you would find the analysts working for more than 100 hours a week. The day would start might be at 10.00 am or even earlier and end at 2.00am and weekends could not be an exception.
When working on the big deals and during the beginning stages of it, it is not at all uncommon for the analysts to be up all night and get through the work.
It could be comparatively better at the Associates level, where the average number of working hours could range from say 80-90 hours per week, from 9.00 am to 11.00 pm and working either of the day on weekends.
When it goes higher up the chain at a Vice President level the hours would improve. VP’s, if at they have to work on weekends or late nights, can do it from home.
Managing Directors have a significantly better work schedule when they do not travel they could report at 7.00 am and leave by 6.00 pm. However, MD’s have a lot of traveling to do perhaps 3 out of every 5 days on average, where they need to do a lot of marketing and pitching.
It is also possible that sometimes Analysts and Associates could go out for pitching and sometimes would be spent in office. Having said this lifestyle and the working hours vary across bulge bracket banks and could be better.
Many experienced in this industry would say that more than the number of working hours, it is because of the unpredictability of the working hours which makes it erratic. You do not have any control over your social life and will have to sacrifice lot of your personal time.

Unpredictable nature of work

The work is not constant and would vary and would be expected to work on the pitch books, prepare financial models, putting across the deal memorandum etc.
In the morning, you would find for yourself a fresh stock of work required to be done on the marketing pitch book or live deal work.
The higher ups get to office early and check on the last night’s work that you left. But you would receive the comments and review on the work much later on the evening which you would have to finalize before you leave for the day and your VP gets into the office in morning.
The work gets hectic only after lunch as you get the list of works to be done through the day. Time would be majorly spent on going through the pitch books, creating deal models, working on numerous transaction alternatives.
Through this, the work majorly is done on spreadsheet software like the Excel and presenting your models effectively in a power point presentation.

Stress

As a result of the above two downsides we discussed comes STRESS. Also, investment bankers deal with huge amount of money and there are a lot of expectations from them to convert deals into profit.
These conditions lead to pressure to perform and many a times it is observed bankers get wound up with insomnia, eating disorders, alcoholism, and other health issues.
There is always urgency to the task assigned to you, it’s not a day or two limited urgencies but more of a day-by-day urgency.
You could also receive phone calls in the middle of good night sleep in case you are handling certain foreign accounts.

No leniency for errors

As an investment banking analyst, you would be expected to learn your job quickly and perform to a very high standard. You would have to ensure the responsibilities are completed on time paying close attention to detail as there would be no room for mistakes.

Work pressure

As we already saw that as investment bankers you would be working with many strong and bright minded personalities. But with this upside comes lot of pressure to perform as you would be compared to your colleagues and will have to outperform them if you need to go up the ladder. You will find that you could make very few friends as this industry itself is deeply competitive and people are hungry for profits and higher bonuses for themselves.

Performing not so important tasks

Although it is true that analysts can be given lot of responsibilities early on in their careers they will every so often be expected to work on tasks which are not that desirable such as copy pasting, photocopying, book meeting rooms etc.

When to quit investment banking?

You may be wondering why we are discussing this topic here in Investment banker life. But believe me once you are into investment banking this question is going to pose in front of you some or the other day and for some every day.

Investment bankers do consider leaving their jobs for various reasons which you could have already learnt from the above discussions in the article. Although there is nothing wrong in quitting what matters is quitting graciously at the right time for the right reason.

So when should you quit Investment banking? It would be very wrong to decide when would be the correct time to call it a quit. It is an individualistic decision which should be taken after considering a few important points;

Quit because you are having bad day at work?

No, never quit because of this reason. You will have plenty of those in investment banking. It is very normal to have a bad day when your decisions fail or you somehow do not deliver up to the expectations. It is better to learn from such situations give it some time and see if there is an improvement. If it doesn’t then go for it!

Do you see yourself as an investment banker for the rest of your life?

Let’s consider a situation that you have spent approximately 2 years in this profession. Observing the Managing Directors at your firm (who make millions, delegate the work and leave the office at 6pm) and think that you want to be that person then this is one indication that perhaps you would want to continue as a banker.

Have you spent enough time to exit investment banking?

You need to make yourself marketable enough before you decide to quit investment banking. It is hence always recommended that you must finish at least two years before you quit. It is better to gain anywhere between 2 and 5 years’ experience as anything less than 2 would be tagged ‘lack of experience’ and more than 5 as ‘too experienced’.

Does quitting mean you are failing?

You might feel as a banker that you have urge to quit because you are unable to handle the job well. And you continue working hard day in day out but never satisfied. Don’t think that you have failed when you decide to quit. You have learnt a great deal in the times you have survived and it is more like working out what you want to do with your life rather than continuing something which you don’t believe in.

Money is no longer a motivation

We know that you would be paid really well as an investment banker. But there could be a point where you realize that money no longer motivates you to stay as an investment banker especially if you are not enjoying the kind of work you are doing. You could consider a quit if you think you can earn something less but take up a job which is not as demanding as investment banking.

It is always better to think what is important to you and what you wish to do ahead that will decide your decision to move on with something else but investment banking. Ensure you have planned what next? Once you have decided to call it quits.

Conclusion

We can say that investment banking is an industry which can provides loads of opportunities to learn, but you will have to find ways to survive with all that we have discussed. You would surely earn enough but discovering time to spend it is the hard part. The life as an investment banker is going to be hectic but those who wish to live through dedication, competition, risks and perform well then investment banking is the right choice for them.

Hope this article provided you with necessary insights of an Investment Banker’s life.

by Jesal Shethna