Define investment banking

Investment Banking, does this term ring any bells in your brain? If you look at the word from a simple perspective, what do you infer? Investment Banking seems like investment in the field of banking, right? Wrong! What we have just inferred from the term is nothing even remotely close to the actual definition of Investment Banking. Actually, Investment Banking is a banking function. It is a function that commercial banks apply to help their clients acquire funds and generate wealth through prudent investment of their resources. And that is not the complete definition of Investment Banking. Investment Banking also involves Investment bankers of various banks engaging themselves in providing advice and assistance to large companies regarding a particular investment or a portfolio of investments.

Well, as said earlier, in investment banking, the investment bankers provide investment help to large companies make profitable investments. This advice helps the companies generate funds in two ways. Firstly, due to this advice, the companies may be able to raise fresh capital from the public by selling stocks. On the other hand, it may seek out venture capitalists or private equity to become stakeholders in the company. Firms involved in investment banking also provide financial consulting services to their subscriber firms and help and advice them in the matters of takeover and mergers. Investment Banking also helps the companies in deciding the right time to make public offers as well as helps mange assets in a better manner. The function of mergers and acquisitions come under the corporate finance function of an investment bank.

So after reading till here, you must be thinking that investment banking sounds somewhat similar to private brokerage. Well, you are right. In some way, investment banking is similar to private brokerage. Due to the de-regularization of the banking sector, the banks are now able to take up many issues of their clients which they were not able to do earlier. Also the emergence of the concept of mega banks has led to a wide increase in the scope of investment banking. Thus, investment banking today covers virtually every aspect of an individual or company's wealth management process.

The functions performed by an investment bank are many and varied. One of the most important offerings of investment banking is sales. Sales people representing investment banks actually take the role of the classic institutional salesperson. Relationships are developed between brokers and investors that help in better trading of stocks in the market. Also, it is only due to the building of this relationship that brokers provide the much needed information to their clients regarding which stocks should be bought and which should be sold. Also, research analysts always keep an eye on the performance of the stocks and fixed income securities and suggest the clients regarding the proper time at which a particular stock or security should be bought or sold.