What is Securities Research?

Securities research is a specialized task that is common within the financial community. The purpose of this particular service is to identify and assimilate all relevant data regarding certain types of securities, for the purposes of providing data that investors and brokers can use in determining what assets to purchase and what ones to avoid for the time being. In some cases, securities research is highly specialized, relating to the securities issued by a specific company. At other times, the research may be aimed at an entire sector of the marketplace, or on a specific type of investment, such as stocks or bonds.

Individuals who engage in securities research are often known by several different names, including research analysts, securities analysts, or financial analysts. Some of these individuals focus attention on a particular type of security. For example, an analyst may concentrate on analyzing different types of bond issues, or have demonstrated expertise in assessing the condition of stocks associated with a specific industry. Still other analysts approach the market as a whole, and are competent in researching a wide range of securities when and as requested.

The scope of securities research includes developing an in-depth understanding of the entity that is issuing the security in question. This means that if the security happens to be a bond issue created by a municipality, the analyst will look closely at the current financial stability of that issuer, historical data related to past bond issues, and the probability of the issuer being able to honor the commitments made to all investors who choose to purchase the bonds. Along with assessing the status of the issuer, the securities research analyst will also look closely at the terms and conditions of the bond issue itself, noting the type of bond involved, the potential return, the presence of any provisions for calling the bond early, and in general assessing the feasibility of purchasing the bond. By doing so, the analyst is able to equip the investor with all he or she needs to know in order to make an informed decision regarding the purchase of the bond.

It is not unusual for investors and brokers to seek opinions from several different securities research analysts before choosing to invest significant amounts of money into a new opportunity. Here, the focus is on noting which points the various analysts agree, as well as the points at which they differ. This approach allows the investor to benefit from exposure to different interpretations of the available data. In addition, there is always the chance that some information overlooked by one analyst may be supplied in the assessment prepared by a different analyst, which in turn provides the investor with a more thorough understanding of the potential gains and risks associated with that investment.