The year is 1982. The finance, software, and media behemoth company Bloomberg L.P. has launched a revolutionary product, the Bloomberg Terminal. Bloomberg Terminal is a computer software system that enables individuals and businesses to monitor and analyze real-time stock information to make better-informed investing decisions.
The product became popular among its users over time. Cut to 2016, the Bloomberg Terminal has more than 325,000 subscribers worldwide, who are more than happy to pay tens of thousands of dollars as fees per year. After all, the terminal has helped them get much higher returns than the annual fee.
In today’s digital age, humongous amounts of data get generated on a daily basis. When it comes to the financial sector, individuals and businesses can leverage the data to gain in-depth insights. They can analyze trends, patterns, risks, sentiment, and other information with data analytics tools to make sound data-driven investments.
So, how can you use good quality data to make better investing decisions? Let’s find out.
1. Identify Market Trends
Artificial intelligence and machine learning-based applications can analyze large volumes of data in a matter of minutes. This can help uncover significant market trends that can assist in making better-informed investment decisions in the future.
For example, applications can help identify the periods when the markets, and even particular stocks, see a bull or a bearish run by analyzing vast amounts of historical data.
Based on this analysis, you have a better prediction of how the market will behave in the future and make wise decisions.
2. Enhance Risk Management
There is always a risk factor associated, irrespective of the type of investment you are making. For instance, there are varying levels of risks associated in investing in stocks, real estate, bonds, mutual funds, and exchange-traded funds.
Data analysis can help mitigate or minimize the risks substantially. For example, data can help uncover the risks associated with each type of investment with a higher accuracy.
Thus, this reduces the chances of you incurring a loss on your investments.
3. Improve Portfolio Management
Investors need to have a keen eye on various investment options to have a successful and profitable portfolio. Access to high-quality data and AI systems empowers investors to constantly analyze micro and macroeconomics, which is impossible to do manually.
These include economic indicators, market outlook, and so on. Investors, can, thus make and manage their investments efficiently and improve their portfolio by leveraging data analytics and AI investment tools.
4. Safeguard Against Emotion-Driven Decisions
If you want to be a good investor, then you have to learn to keep your emotions at bay. However, this seldom happens. Risky investment decisions based on emotions can lead to significant losses.
However, access to quality data can help keep a practical mindset by providing logical insights. No emotion factor comes into play with computer-based analysis.
Thus, you can avoid making catastrophic decisions by making use of data analytics.
5. Explore New Investment Options
Successful investors are always on the lookout for new investment options, and good quality data helps exactly with that. With data analysis, you can assess the profitability of the investment with a high degree.
Investors can use data sources like volatility, risks, average annual returns, and others to find new investment avenues that provide a high return. This also helps diversify your portfolio and provides better financial protection.
Now, lets take a look at some of the best data-driven investment strategies that you can use to make better investing decisions.
Data-Driven Investment Strategies
There are various strategies utilized by investors to make wise investment decisions. Here is a look at some of the most common ones that you can leverage.
- Algo-investing
Algo-investing or AI-based investing depends upon the results provided by AI algorithms to make investment decisions. It is also known as black-box trading and is primarily used by hedge funds, PEs, and VCs.
- Event-driven
As the name suggests, event-driven investment relies on major local and global financial events to make investment decisions. Data regarding current and historical financial, political, and other events are analyzed to get insights about how various financial markets will perform.
- Model-driven
Model-driven investment strategies involve making investments based on insights provided by pre-existing or new machine learning models.
Top Data-Driven Investment Tools
Data-driven investment tools or financial analytics software empowers investors to carry out robust and detailed data analysis on investment-related data. The analysis helps uncover hidden insights that can help make better investment decisions. Here is a look at some such tools.
- TradingView
TradingView is a powerful tool for traders with varying levels of experience. It allows users to easily analyze stock prices, volume, and historical data by providing a commercial data feed.
The software also has a social network feature that lets users interact with each other, share ideas, and set up topic-based chats.
- Asset-Map
Asset-Map is a simple, clean, and easy-to-use software that helps advisors and their customers make better financial decisions. It provides in-depth data-driven insights related to wealth management, investment, and insurance markets.
- YCharts
YCharts is one of the best platforms that enables individuals to make smarter financial investments. It provides simple, graphical, and detailed stock charts, stock ratings, and other economic indicators. It has received positive reviews from users and reviewers alike.
Similarly, there are other numerous other data-based financial software that can help make better investing decisions.
Parting Thoughts
The rise of data has opened up limitless opportunities for investors to make better investment decisions. Data-driven investments provide a greater chance of getting high returns on your investment. It examines data in its entirety to uncover hidden trends, connections, patterns, and risks, that are otherwise not possible with manual methods.
Thus, if possible, you should rely on data analytics and AI-based apps to make your investment decisions. You will surely get your money back multiplied multiple times with data-driven investment decisions.