How to Use Insights For Better Data-Driven Investment Decisions

Insights

While intuition is a helpful tool that takes you down a particular individual path, it’s a mistake to base all decisions solely around a gut feeling. With a thorough analysis of key market insights, finding early-stage startups for potential investment becomes much easier. You’re able to identify companies that have the most potential to succeed in the future, which leads to better investment returns.

Although it’s great to develop intuition, a survey has contradicted that it’s not always the right thing to do. Conducted by PwC, a survey of 1,000 senior executives, showed that decisions made based on data are three times more likely to be successful. Rather than “going with the gut”, you should embrace insights that help make better investment decisions. 

What is insight decision-making?

Insight or data-driven decision-making is the process of analyzing data received to make informed decisions and validating actions before committing to them. Fundamentally, decisions made using insights are the steps to completing successful investments by using leveraged, verified data rather than merely shooting in the dark. 

However, to extract genuine value from insights, they must be accurate and relevant to your aims. Collecting, extracting, formatting, and analyzing insights is quite a dense task. Today technologies do help with collecting and then extracting the data they get from insights. 

There are different types of insights you can derive from data – some are analyzed by humans, while others can be solely technology-based. Here’s how you can get valuable data for future investment decisions:

  • Surveys. You can collect surveys to identify if it’s worth further investing in products, services, and features.
  • User tests. Conduct user tests to identify potential issues and what problems need to be invested in. 
  • Change analysis. Analyze shifts in data to determine opportunities or threats.

The importance of using insights

As much as technology has influenced the investment decision process, there are still decision-makers who work solely by self-identified formulas. The idea of this investment science is not to diminish the knowledge or expertise – but rather to increase the chances of a higher return on investment. 

According to IBM, for an effective digital-first enterprise strategy, you need to use a data-first approach. With mass data gathering, you can get enough data for investment analysis that will help you to identify key risks increasing the quality of analysis.

Main types of investment insights

It’s a fact that technology plays a big role in modern investment decisions. Computers and data have long existed before getting incorporated into investments but the rise of electronics has unequivocally changed the investment decision-making process. Digitalizing the investment process will emerge as the dominant force against human analysis. 

Behavioral alpha 

Investment behavioral analytics is focused on providing asset managers and owners with a part of a larger cloud-based solutions platform. The platforms work in a way that managers can run analysis on historical trading activity and pin down where value is adding or decreasing. 

You just ask the platform questions it can answer based on investment data science. Even a short list of questions brings the results of the ongoing analysis which will have a positive impact on decision-making. 

Contextual analysis

Contextual analysis is a small but important part of investment analysis. Both investors and companies need a perception of the investment landscape, which includes potential threats or conflicts.

Contextual analysis is good for all investments but especially for investments that use land and involve potential land use change. For example, agriculture, forestry, and renewable energy are all strategic sectors. 

The information from the analysis caters to action plans required from investees for measures to protect the rights of people and communities, ensure healthy relationships with stakeholders, and avoid challenges, delays, and unplanned costs that emerge. 

Big data analytics 

Big data analytics is a challenging process of analyzing huge volumes of data to find valuable information that might assist business leaders in making wise decisions about their operations. This information may include hidden patterns, correlations, market trends, and customer preferences. Organizations can analyze data sets and gain new insights using data analytics technology and processes.

Key benefits of using insights

By using industry insights you’re able to better understand what’s going on in the market and how different companies perform. You can quickly identify key trends and patterns, which will lead you to more business opportunities and gains. Here are the key benefits you can get from using market insights for your investment decisions:

Confident decisions

Once you begin collecting and analyzing insights from data, you’re likely to find it easier to make a confident decision about any investment. Data performs many roles. On one side, it serves to measure what currently exists, you get a greater understanding of the impact a decision you make will have on your investment.  

Beyond this, data is logical and concrete in a way that the gut will never be. This stable evidence and confidence allow you to fully commit to a particular decision or strategy without being overly concerned that your decision might be wrong. 

Proactive attitude

When you first administer a data-driven decision-making process, it is expected to be reactionary in nature. The data supplies you with information to which you then react. 

With enough time and practice, in the future when receiving the right types of information, you’ll be able to leverage it in a more proactive way. You’ll identify investment opportunities before your competition does or detect threats before they grow too serious. 

Ability to save resources 

There are many reasons you might choose to invest in a big data initiative and aim to become more data-driven in its process. As noticed in a recent survey of Fortune 1,000 executives, these initiatives vary in their rates of success. According to the survey, the most impactful initiative is using data to decrease expenses, more than 49% have seen value. 

Conclusion

The progress in analytics and research makes decision-making much more serene. Insights allow managers to understand the dynamics, risks, and anticipations. By embracing the power of insights, you can make informed investment decisions with confidence – the kind that will lead to business success and growth.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.