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EVERYBODY thinks that a career in the finance sector is all about money. This is not exactly the case though it is related to money. Obtaining a degree in banking or related field is just the first step towards a thousand mile journey. At this juncture a fresh graduate should take stock of available career options and weigh the industry sectors that have maximum openings. One may also factor in career growth. But to cash in on this, one has to be industry-ready. “The Finance and Accounts departments are essentially the lifelines of any organization and companies often prefer candidates with skills and expertise,” says Rishi Kumar Sharma, CA.BANKING & FINANCEBanking and Finance sector has immense growth potential. Most players now focus on the rural segment where banking and financial services penetration is very little or negligible. This is also the sector which recruit in bunches. Around 25 application are pending with RBI for new banking licenses, which means that once they start their services there will be a huge demand for trained people. New financial institutions and private banks have entered this field, broadening the range of banking services and resulting in more options for trained personnel.Financial management provides a number of career options ranging from financial planning to sales. The primary focus is on study of concepts in specialized subjects and topics related to General Management, Banking, Finance, Economics, Law and various soft-skill training. The curriculum also includes a comprehensive study of the banking processes.Debasish BiswasCountry Head,CIMA India"Management accountancy as a career option in the country is fairly new as compared to other commerce career options that have been around for decades now. Having said that, management accounting as a long-term career has found immense favour with the Indian student population"Indian Economy is poised to touch US$ 5 trillion by 2020, pushing the demand for qualified banking professionals and those with the required skill-sets to manage financial marketsJob profilesAfter completing Postgraduate Diploma in Banking & Finance (PGDBF) you can begin your career as a Probationary Officer in private or public sector banks. A Probationary Officer can reach up to the level of bank chairman. Remember, ChandaKochhar, who started her career as a Management Trainee with ICICI bank in 1984 rose to the position of Managing Director (MD) and Chief Executive Officer (CEO).In private and international banks, graduates can get jobs like that of a Project Finance Manager, Equity and Fixed Income Settlements Specialists, Commercial Finance Manager, Compliance Officer, Corporate Banking Trade Analyst, Cash Management Operator and Consumer Banking Asset Operator. Other job profiles are: Business Analyst, Market Risk Analyst, Corporate Banking Credit Analyst, Consumer Banking Asset Operation Manager, Forex Head and Corporate Banking Branch Head, in banks like ABN AMRO, Deutsche Bank, Barclays Plc, HSBC, Citi Bank N.A. Dresdner Bank, Goldman Sachs, Lehman Brothers, Standard Chartered Bank, Royal Bank of Scotland.Top coursePostgraduate Diploma in Banking & Finance (PGDBF)Offered by Federal Manipal School of Banking (FMSB), this course is an exclusive partnership forged between Federal Bank and Manipal Global Education services to develop Bankers of tomorrow.Duration: One yearEligibility: Gradutes with minimum 60% marksFees: Rs. 3.30 lakhs.Admission criteria: Through aptitude test and PI conducted by the instituteWeb: www.federalbank.co.in/federal-manipalFINANCIAL MARKETSDriven by rising personal incomes, corporate restructuring, de-regulation and liberalization of financial markets, the Indian economy is expected to become a US$ 5 trillion economy by 2020. Financial market is a broad term that refers to any marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. India’s financial system comprises financial institutions, financial markets, financial instruments and services. Financial intermediation in the organized sector is conducted by a large number of financial institutions.“Never before has the country needed the services of Accountancy/Finance Professionals in every facet of the economy,” shares Rishi Kumar. This domain deals with Financial Institutions & Markets, capital markets operations, corporate finance, commodities market and the core focus is on Foreign Exchange and Currency Markets, Financial Valuation and Modelling, Equity Research, Financial Econometrics, Wealth Management, Investment Banking, Mutual Funds & Fixed Income Securities.Job profilesAfter completing the course one can find placement as a Financial Planner, as an Analyst - equity, technical, derivatives, as fund/risk/portfolio/wealth manager. Most of the recruitments are done by banks, consultancy firms, mutual fund houses, research firms, KPOs, broking firms, equity research firms and capital market players.Top Courses1. Post-Graduate Programme in Securities Markets (PGPSM)Securities and Exchange Board of India (SEBI) has established the National Institute of Securities Markets (NISM) that offers Post Graduate Programme in Securities Markets. The full-time course deals with fund management, sales/product and brand management, operations and services, information technology, financial advice and planning among others.Duration: One YearEligibility: Graduate. Experience of 6 months to 2 years is desirable, but not essential.Fees: INR 3 lakhsAdmission criteria: GMAT, XAT or NISM scoresWeb: National Institute of Securities Markets (NISM)2. PG Programme in Global Financial Markets (PGP-GFM)BSE Institute Ltd., a capital market educational institute, offers full-time PG programme in Global Financial Markets (PGP-GFM). It deals with fundamentals and economics of the financial markets, capital markets, corporate finance, portfolio management, securities and business law.Duration: Two years (20 modules)Eligibility: Graduates with minimum 50% marksFees: INR 4.25 lakhs excluding service tax.Admission Criteria: On the basis of entrance exam conducted by BSE Institute Ltd or valid CAT/MAT or MAH-CET scores. The selection is based on the basis of GD PI.Web: Post-Graduation in Financial Markets3. Post Graduate Diploma in Management in Financial Markets PGDM (FM)This is a full-time course jointly offered by National Institute of Financial Management and National Stock Exchange of India Ltd. It deals with major areas of financial markets, equity, debt, mutual funds, currency derivatives and commodities etc.Duration: One yearEligibility: Graduates with minimum 50% from a recognized University.Fees: INR 4.5 lakhsAdmission Criteria: Through NIFM-NSE online test. But those with valid CAT/GMAT/XAT/CMAT score are not required to appear in the online test. Selection is based on the basis of personal interview or video interview.Web: National Institute of Financial ManagementCRISIL Certified Analyst ProgrammeA Standard and Poor’s Company, CRISIL is a rating agency and also works in areas of risk and policy advisory. The agency that provides research inputs to leading banks and firms offers two-year intensive work-cum-study programme that combines job assignments, interactive workshops and academic studies to equip the learner with exceptional financial and business skills. “The financial services industry is highly knowledge-intensive. Hence, young graduates desiring to excel in this domain need to invest in developing strong fundamentals in their chosen subjects,’ says G Ravishankar, President, Human Resources and Strategy, CRISIL.G RavishankarPresident, HR and Strategy, CRISILThe financial services industry is highly knowledge-intensive. Hence, young graduates desiring to excel in this domain need to invest in developing strong fundamentals in their chosen subjects“Other traits that differentiate ‘good ’finance professionals from the ‘great’ ones are detail orientation and analytical rigour. These are the pillars of a career in financial services. In addition, high commitment levels and a sharp learning curve are attitudinal aspects that go a long way towards ensuring success,” Ravishankar added.

Not at all.The issue is that “value investing” is often misunderstood and/or too rigidly defined, and the worst offenders are often those who self-identify the most as “value investors”.To explain what I mean, let’s start by looking at one of the largest “value” funds in the industry, the Vanguard Value Index Fund (VIVAX)[1]. In its prospectus[2], it states that it tries to mimic the CRSP U.S. Large Cap Value Index. This is a third-party index that is maintained by the Center for Research in Security Prices (i.e. CRSP). The index classifies stocks by “growth” and “value”. As it states here[3], it classifies “value” through some of the following metrics:Book-to-price ratioForward earnings to priceHistorical earnings to priceDividend-to-price ratioSales-to-price ratioEssentially, this “value” index looks for stocks with low price-to-earnings ratios, high dividend yields etc. These are the sort of stocks that traditional “value investors” have favored.The problem is that “value investing” was never defined by these metrics.If we go back to the basics, the most basic, fundamental principle of “value investing” is to buy securities that are trading at a sufficient margin of safety below intrinsic value.Determining intrinsic value depends on thorough analysis of what can sometimes be an almost-infinite array of factors: long-term growth prospects, strength of a company’s economic moat, the quality of management, addressable market size, strategic platform value, hidden assets, hidden liabilities, etc.Similarly, determining an appropriate margin of safety depends on evaluating an array of risk factors, understanding what’s known and unknown and even the risk of “unknown unknowns”.Notice that this principle says nothing about price-to-earning multiples, price-to-book ratios, specific industries that you should focus on, specific investing styles that you should adhere to, etc.But far too often, I have seen traditional “value investors” stick subbornly to specific investing formulas, whether they are based on certain financial metrics, staying away from certain industries that are perceived to be “too hard”, etc.For a long time, traditional “value investors” did not give even a second of thought to look at anything in the technology sector.I know this because I discovered technology investing and “value investing” at around the same time, first reading the Essays of Warren Buffett[4] in November 2004 and then joining a technology investing group shortly thereafter. At the time, many people thought that “value investing” principles could not possibly be applicable to technology companies.Some of the cited reasons included:Lack of accounting earningsLack of tangible assets (an accounting term); negative book valuePrice-to-earnings ratios were “too high”The fast pace of change and disruptionTechnology too complicated; falls into the “too hard” bucketIt also did not help that the dotcom and telecom crash were still fresh on people’s minds and that traditional “value investing” had enjoyed one of its best-ever runs in recent years.However, if you spent some time thinking about it — as I had for my investment firm — one could come up with a lot of valid and reasonable counter-arguments as well:Technology firms generally expense everything, despite the reality that they are often building “stuff” (e.g. software, IP, sticky customers) that has enduring long-term value — this partially addresses some of the concerns about lack of tangible assets and/or earnings and high price-to-earnings ratios especially for the faster-growing ones. In other words, one can argue that much of this is really a function of how accounting standards tend to treat technology companies vs. companies in other industries.There are sub-sectors within technology that certainly experience very short product cycles and carry significant technology risk. However, technology is a very broad term that covers dozens if not hundreds of sub-sectors. For example, enterprise software companies provide one of the stickiest products and services as many of them are highly customized and integrated into critical operations of businesses. Customer retention rates can easily be over 100% if you factor in contracted price renewals and up-sell opportunities. These companies, if anything, are really hard to disrupt and actually have really strong moats.Similarly, there are most certainly areas within the broad technology sector that are really hard to understand and require a significant amount of niche expertise: Semiconductor capital equipment comes to mind. However, there are other areas within the technology sector that are relatively easy to understand. For example, you do not need to really need to know how to program to understand why salesforce.com is such a sticky and mission-critical platform for its users. You do not need to understand the intricacies of how to build out a datacenter to understand why Amazon Web Services is such a great business.Here’s the thing: I do not think the fundamental principles of “value investing” apply narrowly to a certain type of company or industry or a certain set of financial ratios. On the contrary, they are generally applicable to investing, broadly defined.One of the issues that I often see with all investors is the tendency to get too comfortable investing a certain way — especially when it has worked well in the past. Being stubborn and close-minded shuts you off from new information that may run counter to your existing world view. Add in pride and the investing results can be absolutely horrific.While Benjamin Graham (a.k.a. the “father of value investing”[5]) and his protege Warren Buffett (whom many consider the best investor of all time) found tremendous success investing in “cigar butt” type businesses in the first half of the 21st century, it does not mean that this investing style will work today. The American economy is fundamentally different. The sophistication level of investors is much higher. Technology and modern SEC rules have changed the way that information is disseminated. Indeed, Mr. Buffett himself credits much of his success to changing his investing style over time from “cigar butts” to “great companies at decent prices”[6].The “dynamical” nature of markets[7] virtually guarantees that something that worked in the past will not work in the future.In other words, investors need to learn how to adapt to a constantly evolving external environment over time. There is a balance between focus and “staying within your circle of competence” and being willing to expand those “circles of competence” over time[8] or even rejecting strategies that may have worked in the past. Investors need to be open to defining “intrinsic value” in different ways, not just the way it has been defined in the past. They need to be able to assess new types of risks that emerge as the business world and economy changes. If you can do that, the original principles of “value investing” as espoused by Ben Graham can still work extremely well.These principles are simple to understand but difficult to implement. But being difficult and the need to rise to the challenge is what drew me to investing in the first place. I view investing as the accumulation of wisdom over a long period of time through the process of continuous learning and expanding your “circles of competence”.Part and parcel with this is staying rational and avoiding ideological rigidity. Again, this is not always the easiest thing to do, and I have certainly had my fair share of mistakes. But I do look at this rational, adaptive approach as one of the guiding principles in my investing process as well as life in general. If you can figure out how to do this with any sort of consistency, I am reasonably confident that your investing style will never be outdated.Footnotes[1] Vanguard Mutual Fund Profile[2] Prospectus and Reports[3] CRSP U.S. Large Cap Value Index[4] Amazon.com: The Essays of Warren Buffett: Lessons for Corporate America, Fourth Edition (9781611637588): Warren E. Buffett, Lawrence A. Cunningham: Books[5] Benjamin Graham - Wikipedia[6] Glenn Luk's answer to What is behind Berkshire Hathaway's sudden interest in Apple?[7] Glenn Luk's answer to Does chaos theory teach anything about financial markets?[8] Glenn Luk's answer to Why is Warren Buffett's only tech stock IBM?

IBM and Louis Gerstner Jr. Before we get into details, let's be clear about the success. It is hard to remember now, but by the mid-1990s, IBM’s mainframe business had declined significantly from its peak in the late 1980s, and the PC division had lost much market share over the same half decade. Perceiving IBM to be in a free fall, the board had removed the CEO. The board also broke with precedent in hiring a new CEO from outside the firm in 1993. That is how Lou Gerstner Jr. came to IBM.Have no doubt about his impact. IBM’s stock price rose from $14.12 at the end of the year in 1993 to $120.96 at the end of the year for 2001, and the dot-com bust did not dent it at all. This was one of the greatest turnarounds in the history of large corporations.How the Strategy Emerged. (You asked for some of the details, so here we go).Gerstner undertook a long-term review of every part of IBM, and after considerable study came to two key decisions: he chose not to break IBM into distinct business units for sale, and he decided to reorganize many of the existing business units around a service-oriented strategy that focused on helping clients to implement IT in more effective ways. The strategy included some restructuring, such as—eventually—selling IBM’s networking business and, instead, purchasing networking services from others. It also stressed investing in business services, especially those related to implementing all aspects of IT used in business operations. While IBM had done some of these activities for years, there was only one obvious problem with this approach in 1995: IBM did not provide every service its clients wanted. In particular, it had no services related to the Internet.This was a major gap, to say the least. IBM had always been more than just a supplier of computer hardware. It helped build reliable and scalable processes, and its employees had deep familiarity with standard industry practices. Yet, despite investment in the NSF Internet by the research division, the rest of the company had not invested in the non-proprietary software needed to satisfy its customers.The relevant events are well known, and here is a brief synopsis. Gerstner appointed a task force, which concluded that IBM needed a new Internet division, and the new division should not be in the classic mold. It should not have a product and its own profit and loss statement, engage in product development, or compete in a race to develop new features. Rather, it should coordinate activities across divisions in IBM. Why? Because, said Irving Wladawsky-Berger, who became head of the Internet division in late 1995, the “Internet touches on all parts of the company. … [You] cannot gather it together in one place.”The essence of IBM’s strategy emerged in 1996, during his first year. Wladawsky-Berger’s team began talking with existing customers with whose business processes IBM’s staff had gained deep familiarity. Many of these were the largest firms in the globe; many had recently bought mainframes and related applications from IBM. More to the point, many of their managers had heard the outsized claims of the new economy entrepreneurs and did not dismiss these claims as outsized. Many viewed their own firms as under threat and wanted IBM’s help in developing a solid strategic response. In that sense the market opportunity fell into the lap of Wladawsky-Berger’s team; many of IBM’s longtime clients had a need and were willing to pay for substantial services that addressed it.Wladawsky-Berger’s team queried IBM’s technical staff and sales force. The team discovered that while a large number of IBM experts were studying the right set of problems, they had not constructed prototypes that buyers wanted. In the recent past employees at IBM had developed network applications of, for example, news aggregation, yellow pages, hosted electronic commerce, and shopping sites. These prototypes addressed many of the potential issues Wladawsky-Berger’s team heard from customers. Yet the vast majority of prototypes in IBM’s laboratories used proprietary components and approaches, not Internet software and web protocols. In short, IBM’s prototypes had part of the vision right in a lab, but all of them implemented solutions that did not appeal to users. They were too cumbersome and far too expensive in comparison to what the web was making possible.The key Features of the Strategy (Again, you asked for it...)At first Wladawsky-Berger’s team concluded that these prototypes gave IBM no comparative advantage in developing solutions for clients. Any competent HTML programmer could design a web page as easily as IBM, after all. The first impression was misleading, however, and Wladawsky-Berger’s views evolved as he came to appreciate that no other large supplier understood the buyer’s business processes of large enterprises as well as IBM’s staff did. IBM could do something unique; they could bring in programmers who had worked at their client in the past, and understood what the software needed to accomplish. That made IBM well placed to address the buyer’s needs as well as preserve some of the existing processes.IBM also could take on a role as a technological intermediary, aiding the client’s move from its unique situation to a distant technical frontier. Why did IBM have a comparative advantage at that task? Because IBM’s employees also had a vision of what the new technology could accomplish in a large enterprise, and they understood from their own prototypes what types of services could be built. IBM’s employees also already had familiarity with IT-related issues in security, firewalls, and preservation of brand value. That knowledge could be very valuable if married to an effective vision about how to implement the new frontier using new Internet and web technologies.IBM could get there if they made only one large change to their attitude about using open systems. Many years later, looking back on it, Wladawsky-Berger described that critical shift:"IBM, like many large businesses, used to be very inward-looking, preferring to do everything by ourselves if at all possible. Embracing the Internet, its open standards, and overall inside-out approach turned out to be much more than a technology change for us. I think it had a very big impact on the overall culture in IBM, as it did in many other companies. It truly made us much more open—e.g., embracing new technology ideas from external communities, as we did with Apache, Linux, and Grid."Principles for a strategy emerged comparatively quickly and employed these three elements:· A vision of the future prototype that created value by delivering new services and meeting the client’s need to match competitive threats;· A commitment to adapt to and respect the client’s existing business processes that already delivered value to the client’s users;· A preference for the open technologies of the Internet and web.As it turned out, using their expertise in their traditional strength, enterprise IT, and making it work with web technologies, IBM’s employees learned how to create bridges between a client's IT processes and a new web front end. They called this bridge middleware. IBM regarded it as a definable IT enterprise project, with many elements that had value in many settings, and where IBM provided all the pieces to adapt the mainframe system to the web and Internet.Most of us take middleware for granted today. It is easy to forget how challenging it was to develop and sell middleware at large scale to a wide variety of clients. Moreover, during the dot-com boom this strategy was regarded skeptically, and many investors treated it as a last ditch effort to stave off the "inevitable" rise of greenfield pure-play electronic commerce. Such investors turned out to be wrong, and it took considerable courage for the management and employees at IBM to stick to their strategy.SummaryAll in all, it was an extraordinary business turnaround.IBM emerged from its near-death experience with a healthy strategy and a lucrative line of services, and it did so by readopting the Internet to new circumstances. This strategy emerged because many of its clients—large enterprises—needed help integrating the commercial Internet into their businesses processes. Integration turned out to be productive, because it reused existing capital for new purposes instead of needing to build processes and operations from scratch. That approach led to a cheaper solution and in less time, and it preserved plenty of valuable processes these large enterprises had perfected in prior years. Hence, the buyer of IBM’s services made out well, and so did IBM.If you want to read more, three useful references are Wladawsky-Berger's web page, Louis Gerstner's book, Who Says Elephants Can’t Dance?, and <self-interest alert> Chapter 10 of my book, Shane Greenstein, How the Internet Became Commercial.