“If I gave you $100,000 right now, what would you do with it?” Ah the typical “does this kid have a brain?” question. It’s got to be one of the easiest investment banking interview questions you’ll ever get and quite fun once you’ve nutted out your 5-part answer.
But in order to grind it you must avoid the one answer-killing mistake that about 2/3rd of students make; they think the banker is asking them what they would do with the $100,000 if they personally had it.
And although the question seems like it is aimed at you and your personal situation, it is not. It’s also not aimed at the banker interviewing you.
How are you meant to manager this question then? Like a unexpected consultant you need to first answer this question with a question
“Who is the investor and what are their goals, risk profile etc.?”
Yeah that’s right. Put on your $60k-a-year financial planner hat and enquire about the kind of return the mythical investor wants, cash flow requirements over time, their personal tax situation, preferred asset classes, favorite industries etc.
PS Unlike management consulting case interviews, don’t expect a banker to offer you that much additional information – 2 or 3 points and they’re usually done. This is after all but one small question in investment banking interviews.
Based on this new information you can explain what you would do. Suggesting an investment strategy that already remotely takes into account this new information will earn you an A here.
If you want to bring your answer to an A+ level…
- Put together a different portfolio of stocks, bonds, real estate, cash and other different asset classes. Students who fail to combine asset classes and instead offer up just one in a “Oh, risk averse, then I’d invest the money in bonds” fact, are idiots. That is a blunt investment strategy with zero ounces of finance finesse – different asset classes deliver different risk / return / cash flow / tax consequences etc, so mix & match with that in mind.
- Mention how much of each in $ amounts, not % – this is a small point, but it can make a big difference to bankers.
- And explain the allocations using the investor’s personal information – particularly their risk profile, income requirements over time, lifestyle goals and personal tax situation.
But when all is said and done, don’t get so complex that you confuse yourself! Wondering aloud “Oh, but hang on, maybe…” like your Drew freaking Barrymore will undo all your hard work in an moment.
PS If the bankers turn around and says the mythical investor is in fact you – and consequently what would ‘you’ do with $100,000 – use the same answering strategy as above, but tailor it to your youthful circumstances. Hint: a 40+ year time horizon = heavy in stocks!