Data analytics has become a crucial element of the financial industry. Financial institutions such as mutual funds and insurance companies are using big data to improve their operations.
The market for financial analytics services is expected to be worth $14 billion by 2026. However, large financial organizations aren’t the only ones relying on big data technology. Individual consumers are also using data to better meet their own financial goals.
One of the most important benefits of data analytics as an individual consumer pertains to investing.
Data Analytics Should Guide Your Investing Decisions
Whether you’re hoping to retire comfortably, send your child to college one day, or buy yourself something nice, investing is the way to go.
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For many Americans, a savings account won’t cut it. You need to make smart investments to secure your financial future. But if you don’t know how to invest in stocks or are unsure of investing strategies, how will you make money?
If you want to learn how to beat the stock market, your first step is learning the basics of investing. Once you understand the basics, you can determine what kind of approach makes sense for you. Some investors like a hands-on approach that allows them to make moves whenever they see opportunities. Other investors prefer a passive approach, allowing a third party to make moves on their behalf.
Regardless of your approach to investing, analytics technology can help immensely. You will want to use data to drive your decisions. You will have a higher chance of improving your ROI, while also being able to meet your investing goals more easily.
If you are buying your own stocks, then you can use predictive analytics and other data-driven investing methods. You will be able to forecast the direction of stock prices, so you can make better long-term buying decisions.
If you are relying on a mutual fund or other institution to handle your investing, then you will want to look at their long-term performance. There are a lot of sites that provide historic data on their rates of returns. You will want to look at this data carefully.
Find out which kind of investor you are and start building your portfolio. Then you will need to know how to incorporate big data into your investing strategy.
Understand Your Options Before Developing Your Data-Driven Investing Strategy
There is no doubt that big data can be invaluable for investors. However, you have to know what approach you would like to take as an investor before you can use data.
Pros of Investing in Stocks
- Imagine making a small $15 investment in a start-up that eventually reaches $150.
- This isn’t some fictional tale—it’s the reality of the stock market.
- The stocks you buy have limitless potential.
- It’s not unusual to see a great return on investments, especially in the small-cap market.
Compared to other investments, such as buying a home, it’s much easier to access the cash value of stocks.
Property sales and similar investments can take months, where stocks can be bought and sold in a matter of seconds.
This level of liquidity makes stock investing both convenient and practical in the fast-paced world we live in today.
- There are so many investment avenues to choose from.
- Want to help save the environment? There are stocks for that.
- Simply want to build long-term wealth? There are stocks for that.
- Passionate about a good cause? There are stocks for that as well.
- Whatever your reasons for investing, there’s likely a niche of the market to profit from.
- The word inflation is enough to send some investors into a frenzy, and for good reason.
- Inflation causes price fluctuations and sets the stage for economic instability.
- But the right investments in the stock market can help you weather the storm.
- According to Goldman Sachs, over the past decade, stocks have had an average return of 9.2%.
- The average inflation rate is 3.22%, which would mean investors saw a 5.98% return on average.
Cons of Investing in Stocks
One of the most treacherous parts of investing in stocks is accounting for volatility.
Some markets, like the copper mining industry, frequently experience significant price swings.
Just in the past year alone, copper reached all-time highs after hitting lows at the beginning of the pandemic.
Surely there were investors who sold their stake in mining companies when the pandemic first began out of fears of prolonged shutdowns.
Yet it didn’t take long for the sector to recover and reward those who stayed on.
If you want to avoid making the wrong move when stocks go through price fluctuations, get advice from a reputable source.
No investor should enter the market without knowledge of past market crashes.
In the past 20 years, we’ve experienced major crashes that devastated investors and non-investors alike.
But one of the biggest mistakes investors make when a crash is imminent or happening is selling too early.
Historically, holding your investment during a crash has paid off in the long run.
It can be difficult knowing what to do when you feel like you need to make a move NOW.
But a smart advisor will keep you informed about your options and help see you through them.
As in life, there are no guarantees in the stock market.
Just because you make a $1,000 investment doesn’t mean you’ll see a massive return.
Really, there’s no guarantee you’ll get a return at all.
That’s why it’s important to get your stock advice and insight from a reliable source.
The right advisor will help you place smart investments that are more likely to get you a good return.
Buying and selling in the stock market aren’t free.
Many investors use a broker to complete their stock transactions.
Some brokers are more reasonable with the fees they charge while others can really drain your money.
Always do your research into a brokerage before going with them.
Using Data Analytics to Identify the Best Stocks To Invest In
Data analytics is also very important if you want to improve your investing strategy. You can use historic data on various stocks or classes of stocks. This can make it easier to identify the best investing opportunities. FXCM Markets and Quantpedia are among the data-driven platforms that help with this.
When you’re just starting out as an investor, you’re looking for a sure-fire way to be successful.
There’s plenty of stocks that can nearly guarantee you’ll see a return, but that’s not always the goal.
Let’s say you invest in a giant like Apple. Sure, you’d see a return on your investment—but relative to the price of the stock you bought, it may not be much. You might also look at historic price data and realize it might not be the best deal.
That’s because it’s harder for giant companies to grow at an incredible rate.
However, let’s say you invest in a small-cap company or even a micro-cap.
The chances of a start-up doubling its market cap are much more likely than a well-established stock.
The small-cap and micro-cap markets are full of potential for massive returns.
But they also have the potential to fail and are less likely to recover from market downswings compared to well-established companies.
This makes researching which small-cap companies imperative.
Luckily, you don’t have to do your research alone. There are stock market advisors who advocate investing in the small-cap market. Click Here to learn more about why 2021 could be the year of Small market.
Learn How to Invest Like a Pro by Using Data Analytics
Data analytics is very useful for investors that want to improve their long-term ROI and meet their investing goals. This is good news, because there are a lot of complexities when it comes to investing in the market. The stock market isn’t easy to navigate on your own. It’s impractical for a beginner to beat the stock market right away, but it’s not impossible to learn. There are plenty of ways to make money on the stock market and Dear Retail is here to keep you informed.
Whether it’s alerting you to the next big gold or copper stock or showing you new strategies, Dear Retail wants to help you become a smarter investor. When you’re ready to start investing like a pro, join our community and become a Dear Retail investor.