INTJ & The Finance Industry - Can I have your take on this please?

[Cyrus]

Hellos everyone,

I'm pretty interested in the finance industry, particularly trading/ investment analysis. Allows one to see the world from a very systematic manner and you can whether what you know really works by putting your money where your mouth is.

Just would like to request some perspective from anyone heading into the industry or already there.

What are your views, what do you like about your jobs, do INTJs fit in well there? (etc)

cheers
Cy

[Max T]

I don't work in the industry but know a bit about it.

My perspective:
-Macroeconomics is worth little since there are too many variables, but it's very sexy to speculate.
-The markets are 97% efficient but can get it very, very wrong 3% of the time.
-I had thought about becoming an analyst, but decided against dedicating time to chasing incremental gains based largely on who's got the more positive expectations of the bond/ commodity/stock.
-Love the risk and return elements, the long-term pespective, the behavioural finance aspects, waiting for companies to be proced ridiculously cheaply and analysis of company fundamentals (personally work in commerce and away from investment industry, so enjoy examining fundamentals and not investor-oriented 'information'). This INTJ enjoys the fact that once the finance decision is made, there is no drawn-out, dull implementation side that commerce has to undertake.
-Research part is fun too; learning about companies from various sources. INTJs like to make sense of systems and then examine what happens next based on own theoretical constructs=fun.
-Wary of the front/middle/back office politics of investment banks- competition's tough for front office work. INTJ might need to put effort into the politics side (not insurmountable).
-Many industry players spout explanations for market movements and then start believing their own justifications. INTJ skepticism is healthy here.
-The industry appears very future proof regarding loss of US jobs through outsourcing.
-I'd recommend doing the CFA (Chartered Financial Analyst) course- very generalist course... and then specialising in a niche. Sounds illogical but CFA is becoming a pass ticket to many jobs in sales, trading, investing and even financial advisor roles.



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for more on INTJ investing opinions in general.

(Off topic: your avatar reminds me of Nassim Taleb's book the Black Swan :-), which reminds me that we're still learning the effect of sub primes (a black swan) on the markets and economy at large).

[Cyrus]

Thanks for the link to the thread Max T.

You're quite in the know for someone not in the industry. Value investor?

Quick comment,
"I had thought about becoming an analyst, but decided against dedicating time to chasing incremental gains based largely on who's got the more positive expectations of the bond/ commodity/stock"

I've been talking to a number of people in the industry lately. The thing that stands out to me, is that none of them see it from an expectations point of view. Most come from the, "it's a great stock. great fundamentals. cheap as anything. I bought in 2004 at $2 now it's @ $16".

Yes, as in INTJ, we do tend to formulate our own worldview of things and battle test them against reality. I think almost every good analyst does that. If you enjoy the subject, perhaps you should consider it as a career if you can.
MHO: You get paid to improve your skills as in investor/analyst/trader, it pays hellova well and you can still do your own investing on your own. Much faster route to freedom, esp if you save a good bulk of your income and have the skill to reinvest it profitably.

I come from the value sch as well but have my roots in technical analysis/trading as well. Both offer the same potential for theoretical constructs --> either way it's cool.

It's unfortunate the CFA is accredited. Full of efficient market this, diversification that.

Appreciate your post Max T. Very comprehensive.

(my avatar's the alt cover of the Black Swan. Good book. Highly entertaining. Fooled by randomness is awesome as well. Should take a read if you haven't)

[Max T]

"I had thought about becoming an analyst, but decided against dedicating time to chasing incremental gains based largely on who's got the more positive expectations of the bond/ commodity/stock"
Take lightly my view on becoming an analyst. My situation differs to yours- you're starting out with the right qualifications for the industry, I'm a little older and with unsuitable experience= greater risk in changing to an analyst and so my quote is perhaps too pessimistic.
Issues that had attracted me to analyst work:
§ Applying business strategy analysis to identify good stocks
§ Applying psychology to investing- behavioural finance.
§ Creation of theories and inductive reasoning to make sense of companies.
§ Competitiveness of beating the market.
§ Opportunity to think differently to the crowd.
§ The history of the stock market (a few classic books from 1930s apply today since the market moves by same old economics and human emotions)
§ Future- oriented perspective.


I come from the value sch as well but have my roots in technical analysis/trading as well. Both offer the same potential for theoretical constructs --> either way it's cool.

Yes I gather that a few value investors do apply technical analysis to guide the exact timing of buying.


It's unfortunate the CFA is accredited. Full of efficient market this, diversification that.

I was inches away from starting CFA. But after reading To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts. covering the syllabus, it become clear that CFA does not teach you how to identify a good investment, it covers everything an inch deep and is largely designed to perpetuate Wall St. business models (commission-driven, rampant diversification etc.).
In effect, the CFA course has a parasitic relationship with Wall St. and so it becomes the no.1 course by helping to sustain the business models. Hence a CFA with a degree and you'll not be out of work.
IF you want to go all the way (I-banking mega salaries), I've read many views that go as: after the degree get two years decent job experience, then start CFA on an evening at 24/25 yrs and finish after 3 yrs, then at 27/28 yrs do an MBA at top 30 B school (you'll get in with CFA since they know you can hack the quant side, but still do GMAT), come out at 29/30 and get snapped up.


I've been talking to a number of people in the industry lately. The thing that stands out to me, is that none of them see it from an expectations point of view. Most come from the, "it's a great stock. great fundamentals. cheap as anything. I bought in 2004 at $2 now it's @ $16".

Michael Maubboissin (sp?) (Chief investment strategist at Legg Mason/ professor at Columbia University) is a big writer on both fundamentals analysis and market expectations (re. his book expectations investing). He writes fascinating articles at Legg Mason's site, and "More than you know" book makes a great christmas stocking filler!


You're quite in the know for someone not in the industry. Value investor?

This is how one INTJ approaches investing: The more I had read about value investing, the more I appreciated the strength of the theory and realised that in the UK it is barely practised (there are some quality funds dotted around the US however- approx 5% of all institutional funds).
Having really understood the theory by reading the only 10 or so good books on the subject, I moved onto the practical issue of making procedures and systems and simple models to run a value portfolio alongside a full time job.

Now it's a systematic process. Once a month I look at the <20 companies whose price has fallen so much that they enter the filters (e.g. P/E <3, dividend yield >10%). Take out the one or two if any at all that are UNdeservedly cheap, crudely estimate their true value (intrinsic), put on the watchlist with 15 or so other companies, wait and wait for the share price to drop further... and buy if they go below half of their intrinsic value (based on 8 hrs analysis), sell when their price rises to full intrinsic (doubling the investment) and repeat the process. 3-5 buy and sell decisions a year.
Buying $1 bills for 50 cents produces absolute (not relative) returns, beats the market and is very low risk.


Yes, as an INTJ, we do tend to formulate our own worldview of things and battle test them against reality. I think almost every good analyst does that.
I think that INTJs are ideally cut out to buy low and sell high- i.e. excel at investing.
Our desire to think different and act independent to the crowd, coupled with a great ability to remove much of the emotion from the investing decision, enables us to act contrary to the masses.
In turn, exploiting other investors' irrational emotions.

In that sense, the stock market is a 'world' where the INTJ, often at odds in the real world regarding influence, politics, self-promotion etc., can really thrive.
Investing is my little science lab/ engineering job/ computer progamming specialism that so many INTJs are drawn to!
I'm sure you'll love becoming an investor/analyst/trader.

[rocksteady]

thanks for reminding me about that book guys, i put it on my wish list when I saw it on the daily show, gonna buy it and read it now! I am also considering a career in finance, a lot of schooling left first!

[Cyrus]

Hi Max T,

Just wanna say a word of thanks for your posts.
You're very generous with your time and knowledge and it's much appreciated.

I use a ROA & ROE > 10% filter, deleverage ROE and look for companies with low/no debt. And wait for them to sell below of equal to 1.5 book value. I read through annual reports to ensure that the business isn't falling to bits and projects in the pipeline look promising as well. Indeed the <100m category has plenty of opportunities.

I was thumbing through Louis Navellier's book, The Little Book that makes you rich. He has a very interesting filter there, thought you might wanna take a look see
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After thumbing through it and "How to make money in stocks" by William O'Neil, it dawns upon me that there are 'formulas' that work in the market - with their respective downsides. Almost causal in nature. So if, A, B, C, D and E are present, the stock generally does well in the next X years.
I find this to be the case in technical analysis as well. Perhaps due to the immutability of human nature.

LOL. I see the markets as my science lab as well. The ideal place to test the soundness of theoretical constructs. =)

What do you think of leverage btw? Eg: Growth stocks using options?
Victor Sperandeo (book's called Trader Vic 1) used Dow Theory to construct a normal distribution of stock market runs. So if the mean is 16% and it's run up to 23% and economic indicators like GDP, housing starts, etc begin rolling over, he looks for a technical top and buys a tonne of OTM puts.

Hypothesis: Learning to live (IE: manage downside well) with leverage allows faster returns

- Rocksteady:
I'm finishing up my education in finance. I think that one of those industries where the practitioners and academics have major divergences in schools of thought (unlike lets say, medicine and engineering?). Remember to use that INTJ skepticism =)

[Max T]

What do you think of leverage btw? Eg: Growth stocks using options?
Victor Sperandeo (book's called Trader Vic 1) used Dow Theory to construct a normal distribution of stock market runs. So if the mean is 16% and it's run up to 23% and economic indicators like GDP, housing starts, etc begin rolling over, he looks for a technical top and buys a tonne of OTM puts.

Hypothesis: Learning to live (IE: manage downside well) with leverage allows faster returns


Afraid I know nothing about options.
Re. leverage/ buying on margin (borrowing money to buy stocks), I just follow Buffett and never borrow. You just need one bad market year and the lender calls and you're forced selling at the worst time.
Leverage may heighten returns or may bankrupt you.
I've 'mentally settled' into 10-15yrs of achieving returns very slowly and inevitably.

[jaykay]

For what it's worth - saw a poll on a trading forum where INTJ's were heavily over-represented adding up to 30% or so of the respondents, whereas INTJs are said to comprise ca 1% of the population according to keirsey.com. The NTs all in all in the poll added up to almost 60% of the respondents.

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/jaykay

[iamnotspock]

If I can jump into this one, guys . . .

First, value investor != (not equal to) investment banker. Investment bankers play with **other** people's money. They live on fees. Their incentive is to gamble. Why? B/c if they win, they win, and if they lose, they don't lose. That is, they get a cut of winnings, and of deals, but it ain't their money if the triple pineapples don't show up on the one armed bandit (insert your better gambling metaphor here, I don't know jack about gambling). That is, if the deal sucks, or fund goes flat, they don't return the fees.

Second, real value investors play with their *** own *** money. Witness Mr. Buffet. He used cash from his business to buy low and hold. This is actually what I've done. Software consulting cash goes into real estate, gold, Berkshire, etc.

Third, filters and stock screens are not quite where it's at. Why? B/c whatever tool you have is piss poor compared to what pro's have. A friend of mine is a quant at Goldman Sachs and he writes some of the software that traders use in-house for derivitive swaps instruments (do you know what those are? me neither). He is paid millions a year to write this stuff. This is a guy who was writing text books on computer science in high school. And his software is doing stuff you and I could not even comprehend. You don't want to compete in that arena alone.

But luckily, you don't have to. Take me. Starting with a couple years ago I have over 300% ROI today. How? Buying low and holding. But the key? Diversify. ** Real ** diversity. Not two types of stocks. Or bonds. But some key stocks. Some commodities. Some foreign real estate. Some random art works. A bottle of wine. Etc.

The INTJ has long term strategic insight and no problem buying what others think is trash. And then s/he waits. That is our game. See the future first. And bet on it. Think Buffet buying companies cheap. Think Bill Gates stealing the empire from under IBM. Think long-term strategic mountain-movers. That's INTJ.

And forget the investment banking BS. The partners are the well-connected prep-school kids who were in the right finals club at Harvard. The quants are triple Ph.D ex-astro-physicist from Russia. And the guy fetching the coffee . . . let's hope it won't be one of us ;-)

[Cyrus]

And forget the investment banking BS. The partners are the well-connected prep-school kids who were in the right finals club at Harvard. The quants are triple Ph.D ex-astro-physicist from Russia. And the guy fetching the coffee . . . let's hope it won't be one of us ;-)

hahahaha. so true.

Just a little point to balance off the quant part. Yes, they're insane people who do complex things that 99% of the population have no clue about. Though I must say that the markets are a wide wide place, plenty of room for people to hunt for stuff. Can't discount human error as well. Just look @ long term capital. 2 nobel prize winners and ex central bankers = kaboom. :laugh:

On filters: They're just the starting point.:) IMHO, I find the small caps to be ignored by the big boys. If you have $1B to invest, u can't quite buy much stock of a company worth $100m only, short of buying out the whole company. For the smaller investor, it's a great place to start building up a nice wad of moolah. Just my 2 cents worth.

I like value, but I lean more towards being a technician. :thumbsup: