Physics Major to Finance: Advice Needed

[kphysik9]

Hey everyone,

I am new to the forum. I just graduated with a B.S. degree in Physics and a minor in finance. I have been working in semiconductor industry for about 6 months.I am very interested in trading and want to move my future careers in that direction. How marketable is my degree to finance firms and MBA programs? Do MBA programs favor business undergrads as opposed to non-business undergrads? Does anyone have experience in this area and advice they could share?

Thanks for any help and advice.

 

[Yitzach]

I don't know much about the transferability of a Physic degree to finance career. But I have heard that it does happen. I took an econ core class because university said to. The prof said that gravity equations where used to model the likelihood and volume of trade. I visited a different university and they said that one of their grads went into finance came back and said that the equations used in finance look like those used in physics. Wikipedia reports that quantitative analysts often have degrees in physics, engineering, or mathematics and very few actually have degrees in finance.
I can't speak to MBA programs.

 

[Pinu7]

Believe it or not, physical laws are used in macro and micro economic(econophysics). I am not sure for finance, though. It does take an entirely different skill set.

 

[twofish-quant]

I am new to the forum. I just graduated with a B.S. degree in Physics and a minor in finance. I have been working in semiconductor industry for about 6 months.I am very interested in trading and want to move my future careers in that direction. How marketable is my degree to finance firms and MBA programs?

People with bachelors in physics tend to go into management consulting firms. There are MBA schools that will take physics degrees, but the path from the MBA degree to finance is pretty tricky. It's very difficult to get into finance with an MBA unless you have a prestige MBA.

The path that I took was physics Ph.D.-> computer programming -> finance. There are also a lot of people that I know of that went from Masters CS/Applied Math -> computer programming -> finance. The thing about those jobs is that they are primarily computer programming development positions, and not trading. One thing about finance is that most jobs don't involve trading, and there are a *LOT* more computer programming positions than trading positions. The developer positions pay good money, but not totally insane amounts of money.

Do MBA programs favor business undergrads as opposed to non-business undergrads? Does anyone have experience in this area and advice they could share?

Depends on the MBA program. However, you do need to realize that most MBA students don't go into finance, and most people that go into finance don't end up as front office traders. One thing that does matter a lot in finance is attitude. If you just sit back and expect to get a degree and then have people pull you up, you aren't going to get very far. You have to be very active in shaking hands, meeting people, marketing yourself, and generally "doing stuff."

The good/bad news is that there are about a dozen different paths into finance from physics. The bad news is that because there are so many ways of getting in, it's hard to summarize.

 

[kphysik9]

Thanks for the advice. Very interesting. Mainly I wanted to know if you think my degree would be looked down upon in the fields of finance? I studied physics because i believed it was the/one of the most respectable degrees to get. I also figured most of the finance knowledge i can pick up on the job, while math skills i would not have been able to.

Twofish-quant: Perhaps you may know this. I've heard a lot of physics Phds work at hedge funds. Is there any chance for physics BS people, or are they really just looking for the phd?

 

[gatorphys]

Its definitely possible to get into finance and trading with a degree in physics. Your biggest problem right now though, is that you're already out of school. With only a bachelors, the best way to get into something as competitive as trading is through some type of summer internship, but these are really only open to kids still in school. So, in my opinion, your best bet is going to be going through some sort of 1-2 year masters program, whether it be a Masters in Finance, or a Masters in mathematical finance or financial engineering, or something else along those lines. These programs will give you the finance skills, but more importantly will allow you to get into internships and give you the opportunity to network (which is by far the most important factor in getting any sort of finance job). Obviously, the more respected the grad school the better, but it can be done out of a decent state school as well. I would recommend not going into an MBA program, as MBA's are really geared towards people who have already had 2+ years of working experience. I would also recommend you go to other websites or forums that are more finance related, as most people on here have no idea what it takes to break into something like IB or trading.

I actually worked for a couple years in Sales and Trading after getting a undergrad degree in Physics, so feel free to pm me with any more questions.

 

[twofish-quant]

So, in my opinion, your best bet is going to be going through some sort of 1-2 year masters program, whether it be a Masters in Finance, or a Masters in mathematical finance or financial engineering, or something else along those lines.

I'd go for the a masters in finance, MBA, masters in computer science, statistics, or applied math. I'd really, really avoid MFE programs. The problem is that finance, business, CS, statistics, applied math teach you some broad skills that could be useful in things other than finance. MFE's are narrowly tailored for one type of finance engineering which means that you are hosed if that no longer is useful (and it's not).

[q]I would recommend not going into an MBA program, as MBA's are really geared towards people who have already had 2+ years of working experience. I would also recommend you go to other websites or forums that are more finance related, as most people on here have no idea what it takes to break into something like IB or trading.[/q]

Also the good/bad news is that there are a *lot* of different types of jobs in finance. The three main paths are MBA-> Sales Masters CS -> Coding Ph.D -> quant/coding

 

[SystemTheory]

My background is electrical engineering and intellectual property law. If you have an inclination to get registered as a Patent Agent your degree qualifies you already, and you only have to study and take the exam. This could help open doors depending on your career path, and it is excellent training for understanding strategic advantage under the intellectual property regime, although most Patent agents are technicians not strategists. You could stay in semiconductor industry and move toward management/IP strategy while going to school at night for finance education ... there are many options.

The principles of trading are not hard. There are three sources of cash to run a business, equity, debt, and retained earnings. The only sustainable source in the long run is retained earnings, so fundamental analysis is figuring out which firms will have sustainable earnings in an industry. These basic concepts are well explained in three books:

The Cash Flow Problem Solver, Brian E. Milling.
101 Business Ratios, Sheldon Gates.
Competition Demystified, Bruce Greenwald (Buffet Style investing & strategic advantage)

To understand the markets and investor psychology I've only required two additional books, and I read Investors Business Daily for a number of years, but note, I have studied law and have a knack for anticipating group behavior. These are books devoted to trading:

How to Make Money in Stocks, William J. O'Neill (also start reading Investors Business Daily)
Rules of the Trade, David S. Nassir (Author was a Day Trader Coach for Institutions)

Personally I enjoy learning a new strategic skill, but once I have some success, get tired of it and want to learn something new, so I am not actively trading at this time. However I did have very good success during the bear market period 2000-2002, doubling my account twice by staying in cash during market corrections, cutting losses quickly, and holding winners during the intermedicate rallies in the bear markets. If you go into the industry of course there is much more to learn than I have mastered ...

 

[twofish-quant]

Thanks for the advice. Very interesting. Mainly I wanted to know if you think my degree would be looked down upon in the fields of finance?

One good/bad thing about finance is that people just care about how much money you can make for them. What topic you got your degree is not totally unimportant but it's less important than in other fields. I've never taken a single formal course in finance, and I think I've only taken two computer science courses in my life.

Twofish-quant: Perhaps you may know this. I've heard a lot of physics Phds work at hedge funds. Is there any chance for physics BS people, or are they really just looking for the phd?

There are a lot of different jobs in finance. Most Ph.D.'s in hedge funds and investment banks are basically numerical researchers, and for those jobs people do want Ph.D.'s because it proves that you've done actual research. There are also developer jobs that need people with 5 years of hard core numerical programming experience and physics Ph.D.'s have that. The other thing is that having a Ph.D. proves that you are an intellectual masochist. Not everyone can stare at a computer for ten hours/day, and having a physics Ph.D. indicates that not only you can do that, but that you *like* doing it.

The curious thing is that there are really very, very few jobs in finance that need physics Ph.D.'s, but there are even fewer physics Ph.D.'s.

 

[x12179x]

I tend to think people go into Physics to get a rigorous take of applying analytical methods and quantitative techniques to understating/analyzing general systems and objects (which is something that can be used and applied to about any other field).

This book might be of interest to you if you haven't already checked it out, of a Physicist turned Quant:
https://www.amazon.com/dp/0471394203/?tag=pfamazon01-20

He was talking about how lots of topics in Physics (Stat. Mech) can be useful to studying trends in the market, since both are aiming to predict the motion of things that are constantly fluctuating.
For instance:
http://en.wikipedia.org/wiki/Brownian_motion"I think Computational abilities you learn in Physics are important too. Probably lots of modeling.

 

[twofish-quant]

I tend to think people go into Physics to get a rigorous take of applying analytical methods and quantitative techniques to understating/analyzing general systems and objects (which is something that can be used and applied to about any other field).

One thing that you'll quickly find out once you deal with real systems is that you usually can't end up with something rigorous, and you are usually desperate to get anything to work at all. Much of finance is just glorified curve fitting, and the useful think about a physics background is that it helps you do think about whether you are going to be in trouble or not if you just draw a straight line between several points.

[q]This book might be of interest to you if you haven't already checked it out, of a Physicist turned Quant: https://www.amazon.com/dp/0471394203/?tag=pfamazon01-20[/q]

It's a good book, but with a major caveat in that it's like reading memoirs of someone that was talking about particle physics in the 1960's. It's useful as history, but a lot of the statements in the book are seriously outdated.

He was talking about how lots of topics in Physics (Stat. Mech) can be useful to studying trends in the market, since both are aiming to predict the motion of things that are constantly fluctuating.

One thing that seems to be the case is that you just can't predict the market. There's very little in finance that deals with actually predicting the market. Most of it deals with how not to get killed in an unpredictable world.

I think Computational abilities you learn in Physics are important too. Probably lots of modeling.

This is one reason Derman's book is a bit dated. Finance has always been computational, but the amount of cheap computing power has made computer skills much more important and "pen and pencil" skills much less important.

 

[myma76]

That's a very interesting career change option - I think your chances are not that bad - if you really want to get into finance, I am sure you will go your way and get your major degree.