by Brian DeChesare Comments (13)

Equities vs. Fixed Income in Sales & Trading: The Top 5 Myths You Should Stop Believing

equities-vs-fixed-income-sales-tradingYou can choose your friends, but you can’t choose your family.

What about your desk when you start working in sales & trading, though?

That one is somewhere in between friends and family on the “choosability” scale.

One small problem, though: if you look at most online discussions of this topic, you’ll get a very misleading view of what different groups and desks are like.

So our usual guest-for-all-things-S&T-related and I sat down to clear up the confusion.

Among other topics, we talk about how to decide between groups, how much math is required, how recruiting is different, and how the workplace environment is different… beyond just the type of trading you’re doing.

Get the full MP3 recording, the transcript, and a summary of the key points after the jump:

Equities vs. Fixed Income: Myth vs. Reality

Based on feedback from the last podcast, we focused on a much narrower topic this time around, and one that’s useful even without specific numbers.

If you’re reading this via RSS, click here to download the MP3 directly.

Click here to download the Transcript for the M&I Podcast – Episode 002.

And yes, you can also now subscribe to the podcast on iTunes, Stitcher, and SoundCloud:

The main theme this time around was myth vs. reality with different groups in S&T.

Jerry did a great job covering fixed income trading and equity trading in previous articles, but this time we focused on how to decide which group is for you.

Myth #1: There is a Big Math Requirement for Fixed Income

If you look at forums, comments, and other online commentary, you might get the impression that you sit around solving partial differential equations all day when you work in Fixed Income.

That is not true at all.

While some products do require more math than others, the right way to view it is “simple product vs. complex product” – not Equities vs. Fixed Income.

For example, within Equities if you’re just trading blue-chip stocks the math is fairly simple… but it gets more involved with equity derivatives, and even more involved with “custom products” created for specific clients’ needs.

It’s more important to be able to make back-of-the-envelope approximations quickly and intuitively.

Myth #2: You Should Think About Equities vs. Fixed Income When Giving Your Group Preferences

While this is how all banks classify their sales & trading divisions, it’s not the best way to think about your personal preferences.

It’s more useful to think about whether you prefer micro or macro analysis – in other words, individual companies or government policies / interest rates / exchange rates?

Much of the “micro” analysis is geared toward Equities, but some of it falls within Fixed Income as well (e.g., if you’re trading corporate bonds and therefore need to understand individual companies’ credit profiles).

Myth #3: You Can Actually Pick Your Desk or Group

This one, unfortunately, is not necessarily true and your fate is mostly in the hands of HR (with a few exceptions, such as JP Morgan, where you can indicate more specific preferences).

And they often decide your fate based on factors such as your numerical test scores rather than your actual preferences.

You might be able to get around this if you’ve done enough networking and/or you know a specific product very well (see the last point below).

Bottom-line: keep in mind preferences about the type of analysis you want to do, along with knowledge of a specific product, but also realize that you’re unlikely to end up exactly where you want.

Myth #4: Trading is More of a “Sprint” Than Banking

Yes, I even mentioned this on the sales & trading vs. investment banking podcast a long time ago…

…but it’s not quite true.

It really depends on the product you’re trading: with the most complex products, typically “structured solutions” (e.g., the client wants a volatility of 15% and then 10 other criteria they can trade derivatives on), you work on long-term projects that might take months to complete.

This is also another way to pick the best type of group: do you want to finish your work for the day and be done with it, or do you prefer longer-term projects?

Myth #5: A Top School and High Grades Give You a Good Chance of Winning S&T Roles

This one isn’t quite a “myth,” but it is an exaggeration because many candidates with this profile make rudimentary mistakes repeatedly in interviews.

The most common one, as my guest points out, is to walk in with an attitude of “I am from LSE / Oxbridge / Harvard / Yale, therefore I can win this internship or job without actually knowing anything about the products you trade.”

While your pedigree may get you interviews, you seal the deal with product-specific knowledge.

Having an intelligent conversation about a specific product you’re interested in, like convertible bonds, is the best way to set yourself apart and the most frequently overlooked part of interview prep.

Table of Contents, the Transcript, and More

If you’re reading this via RSS, click here to download the MP3 directly.

Click here to download the Transcript for the M&I Podcast – Episode 002.

  • 2:41: Overview of Different Groups Within S&T
  • 5:27: How Much Math is Required in Each Group?
  • 9:39: How You Apply and Get Assigned to a Group
  • 11:31: How to Decide Which Group/Desk Suits You Best and Sales vs. Trading
  • 16:00: Complex Trading Products
  • 18:44: How to Decide Between Equities and Fixed Income
  • 21:30: On-the-Job Differences Between Equities and Fixed Income
  • 24:29: Recruiting Differences
  • 29:01: The #1 Mistake Students Make in S&T Interviews
  • 31:55: Conclusion


Up Next Time

The S&T podcasts will continue, but we’re also going to address other topics and industries – including a very different type of corporate finance role offered by big technology companies, and how that could be an interesting option if you want to combine engineering and business.

If you have suggestions for future guests, or you want to be on the podcast yourself (anonymity is OK, but obviously your voice will make you recognizable to anyone who listens), leave a comment below or reply to one of my emails.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Brian, why are traders desiring to trade derivatives, rather then stocks? I have no interest in trading derivatives. I do not even consider them, part of the equities market, but of the speculators’ market.

    1. Avatar
      M&I - Nicole

      In that case you can trade stocks instead. Some traders prefer derivatives perhaps because they maybe more quantitative, though I am not 100% sure.

  2. Great interview, very informative, thanks you for the input mr. Brian.

  3. Hi Brian,

    I went to a networking session for a top BB and got the contact info of a couple guys in their S&T department. I followed up normally and requested an informational interview. However, one of the individuals I contacted said that he was pretty busy this week but would be more than happy to answer any of my questions over email. I was wondering how you would approach a situation like this and what questions you would send him?

    Thanks for the help!

    1. Usually in a case like that, the person isn’t going to be very helpful so if you actually have questions for him you can send them (maybe tips on recruiting, telling your story from your background, tips on which desks might be best for your interests), but otherwise I would not push it too much. It’s better to focus on people who have the time to chat and/or meet in-person.

  4. This was a really good interview. I think it makes much more sense to classify in terms of micro/macro instead of debt/equity for most intents and purposes. This reminds me of your article about how buy vs sell side should also be looked at as micro/macro instead of being fixated on these names. Also, I had no idea that solutions were so custom. Like making an index for a client’s need. I always thought the index was there or it wasn’t. Very good information.

    I have two questions for you and the interviewer:

    1) Is Sales sort of dying a slow death? I heard a few years back from someone who switched out of S&T that sales people had been reduced at most places and they weren’t replacing them. Is there any truth to this, or was this just maybe a temporary happening back around 2010?

    2) Is quant trading really out of favor with big firms? I’m mainly asking about the “technical analysis” side of it where it’s all macro and valuations of sectors and securities have very little to do with it. It seems like technical analysis has been a failure concept from what I’ve seen. Is this a big reason why commodities are not in favor?

    1. Thanks! I’ll attempt to answer your questions:

      1) I don’t think it’s “dying” exactly, but along with the rest of S&T it is probably growing more slowly these days. I’ve seen a fairly big increase in hiring on the IBD side in the past year, but sales hiring seems to be well below that (at least I have not heard/seen as many stories about it).

      2) Not sure about that one but I’ll see if the guest can stop by to answer it. Commodities are definitely out of favor, but I think that’s more due to regulations and pay restrictions than technical analysis falling out of favor.

  5. brian, and guest speaker, again, great job. it’s always great to read and get insight on different roles from people who have been there before.
    looking forward to the next episodes as s&t is what i’m most interested in.

    keep up the good work.

    1. Thanks! More coming up soon.

  6. great interview as always Brian.

    I have a referral from a COO from a mega fund for internship/work experience.However I am in undergrad.
    Certain to happen or not?

    1. Thanks! I wouldn’t say it’s certain to happen, but it should boost your chances by quite a bit.

      1. Is it normal for him to ask me to submit my cv and cover letter to hr? Surely the final decision lays with him?

        1. Avatar
          M&I - Nicole

          Yes because that’s the procedure. He may have a lot of say over hiring decisions, but I’m not sure if he has the final say…

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