Traders and portfolio managers buy, sell and invest in a range of securities, either for themselves or on behalf of clients. While traders focus on maximizing short-term profits, portfolio managers look far into the future and focus on maximizing overall, long-term profits. In 2009, the last year for which data is available, only 29 percent of traders and portfolio managers were women, according to the U.S. Bureau of Labor Statistics, or BLS.
What Traders Do
Traders buy and sell securities such as mutual funds, stocks and bonds either for themselves or for someone else. They usually hold on to these securities for short periods of time and sell them when they maximize their profits. A trader may work for herself or for a company. She may even work for portfolio managers and trade on behalf of a large pool of investor portfolios.
What Portfolio Managers Do
Portfolio managers oversee a team of analysts, which can include traders, and together they decide what stocks, bonds, mutual funds, products and industries a client or company should invest in. She develops long-term investment strategies that are based on her client’s tolerance for risk and goals. She will meet with investors to explain investment decisions and strategies.
Differences
What differentiates a trader from a portfolio manager is how long she holds on to securities and how she gets paid. Traders often earn a commission based on how much they earn for their clients. Traders, according to the BLS, earn an average of $70,000 a year. The top 10 percent earn more than $166,000 a year, while the bottom 10 percent earn less than $31,000. Portfolio managers don't get commissions for the work they do for their clients. Instead, they base their fee on the value of a client's portfolio. For example, a portfolio manager who charges a 2 percent fee for managing a portfolio valued at $500,000 would earn $10,000. A salary calculator at glassdoor.com puts the average income for a portfolio manager at around $105,000.
Similarities
Both a trader and portfolio manager need to hold at least a bachelor’s degree in either economics, finance, math or business. Potential employers also want their traders and portfolio managers to have prior sales experience. They also need to be licensed. The Financial Industry Regulatory Authority is the primary licensing organization for those working in the securities industry. Traders and portfolio managers must also understand market fluctuations and timing, know how to research potential investment vehicles and have some tolerance for risk.
The Career For You
Succeeding as either a trader or portfolio manager requires high energy levels, impeccable negotiation, communication and research skills, and an ability to weather the ups and downs of an unpredictable financial market. A trader has a high tolerance for risk, thrives in fast-paced environments and loves to multitask. A portfolio manager has a lower tolerance for risk and focuses on long-term investment strategies.
References
- Investopedia: Trader
- Investopedia: Portfolio Manager
- Investopedia: Broker of Trader -- Which Career Is Right For You?
- U.S. Bureau of Labor Statistics: Occupational Outlook Handbook -- What Financial Analysts Do
- U.S. Bureau of Labor Statistics: Occupational Outlook Handbook -- What Securities, Commodities and Financial Services Sales Agents Do
- U.S. Bureau of Labor Statistics: Occupational Outlook Handbook -- How to Become a Financial Analyst
- U.S. Bureau of Labor Statistics: Occupational Outlook Handbook -- Securities, Commodities and Financial Services Agents -- Pay
Writer Bio
William Henderson has been writing for newspapers, magazines and journals for more than 15 years. He served as editor of the "New England Blade" and is a former contributor to "The Advocate." His work has also appeared on The Good Men Project, Life By Me and The Huffington Post.