Any financial advisor will emphasize the pivotal role of an educated investor. Investors must be familiar with the differences between stocks and bonds, as well as get acquainted with the firms that issue them, their value and how their value is determined. One point that seems to be overlooked, however, is where to get the data necessary to do your study.
After all, what good is understanding how to analyze a company’s profits if we are unable to ascertain the company’s real earnings?
Corporate filings, perhaps the most relevant source of information, which reveal a company’s financial health, future prospects, and previous performance. This is the kind of information necessary to determine if certain stocks, bonds, or mutual funds are wise investments.
For mutual funds, these filings will provide the fund’s quarterly performance, expense ratio, and portfolio holdings. For the firms that you must examine before purchasing stocks or bonds, these filings outline the company’s financial health and future prospects.
A thorough examination will reveal how and where the firm spends the majority of its money, how profitable its management is, and how optimistic the company’s forecasts are. While many of these reports are not very fun to read and are sometimes difficult to comprehend, they do include a lot of information that all types of investors may benefit from.
Each day, massive amounts of data are created through different data streams from a number of sources. With the volume of global data increasing at an incredible rate, it’s unsurprising that it’s increasingly being utilized as an actionable business component. Various firms across the globe are already recognizing the importance of data analysis investment, as it provides numerous advantages such as identifying market trends, preventing potential fraud, accurate forecasting risks, and better investment decisions.
All of these business advantages position data as a high-return investment that enables firms to remain competitive in their respective areas. Managers and executives are always examining all data investment opportunities in order to stay ahead of the competition. Resources are being taught to exploit data in order to find actionable patterns and insights that directly influence the bottom line. However, failing to invest in data early would only result in organizations falling to their competition.
In private companies, the lack of accessible data is apparent and is one of the reasons investors fail to evaluate companies’ market and share price. A common private investor’s portfolio may be super-diversified, with rich history and track record, but there is nothing to connect the dots between past investments, nor there is something that could give an investor an option to compare his or her portfolio with others, to analyze existing positions or future prospects, compare valuation, market, and alike.
Gaining access to investors’ portfolios, means massive amounts of company data may be analyzed to gain significant insights for optimizing business operations. Although data unlocks new business prospects, firms are still behind in capitalizing on everything that data has to offer and data still mostly remain private, accessible only to big investment firms, shared on a word-to-mouth basis, and managed over messy excel sheets or notes. Not your ideal 2021 hack.
Why Private Investors Should Invest in Data Analysis?
Why? Because knowledge is the new gold.
Earlier in the market’s history, competition was restricted by the presence of a small number of competitors for a given commodity, allowing corporations to enjoy their own monopoly. Open markets and globalization, on the other hand, attract a large number of new competitors and to a certain degree, money has become more accessible, and with technologies booming, there is an enormous number of good opportunities on the one hand, that are very hard to locate on the other (“So Many Trees in the Woods”).
Businesses used every conceivable method in order to keep one step ahead of the competition. We have reached a point in the graph where there is little further opportunity for growth if an investor does not hold the right data, or the right connections when deciding on investments, and that is why investors tend to “stick to what they know”, and by that limiting their opportunities to grow, fast.
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