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Modernising portfolio analytics for reduced risk and better performance

by Uneeb Khan
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portfolio risk analytics

Every portfolio holder has some investment objectives. Even under the most challenging circumstances, investment objectives must be followed. Performance tracking is a must to achieve investment goals. The performance of investments is to be measured regularly. Moreover, the risks involved with the portfolio should be known beforehand. With investment management practices, portfolio holders can drive performance and reduce risks. Individuals and organisations now look for new-age portfolio analytics to drive performance. By modernising portfolio risk analytics, investors can maximise their profits. Read on to know how modernising portfolio analytics can benefit investors.

The need for new-age portfolio analytics

Back in the day, investors relied on manual analysis to detect the performance of investments. However, with increasing market size, investments stopped being simple. Manual analysis failed to detect the performance and return on investment (ROI). Therefore, investors needed automated solutions for portfolio analytics. In 2022, organisations have to analyse large sets of data before investing. Not all this work can be done manually by an investor. Accelerated digitisation and business process automation (BPA) has forced organisations to modernise portfolio analytics.

By the end of 2019, the global portfolio analytics industry was already more than USD20bn. By the end of 2024, it is expected to cross the USD45bn mark. The rise of passive investing also requires high-end analytics in the backdrop. Investors are no longer satisfied with buying an investment and selling it for some profit. They want to churn trading fees and maximise returns. Many organisations have multiple portfolios to manage in 2022. They cannot depend on traditional methods of analysis to measure the financial health of portfolios. New-age portfolio risk analytics can help them maximise their ROI. Increased complexity and market disruptions have also fuelled the need for modern portfolio analytics.

How portfolio analytics boost performance?

The ways in which portfolio analytics drive performance are explained below:

  • Organisations that have multiple portfolios need to identify the top performers and  investments that can offer higher returns. By knowing doing so, they can maximise their profits. With portfolio analytics, strategies can be formed to maximise returns.
  • Not all investments in a portfolio will offer high returns. Some products can hand losses to the investor. However, one can spot the loss-makers with portfolio analytics. Such investments that can bring losses should be discontinued or sold. The idea is to minimise losses by knowing loss-makers in advance. An exit strategy should be in place to cut down the loss on investments.
  • At times, a company or an individual can deviate from their investment objectives. However, investors need to stay intact with their mission and vision. There is no point in financing a dead weight for long. Portfolio analytics are required to follow the investment objectives at all times and maintain financial stability.
  • Investors must make decisions regarding discontinuation, selling, or buying portfolio products. Decision-making has become more complex for investors in 2022. Portfolio analytics reports can act as a guide for investors to make better decisions.

Reducing risk with new-age portfolio analytics

Before diversifying their portfolio, risk tolerance is to be measured. An organisation should know how much it could afford to lose while making investments. In addition, one should know the loss-bearing capacity financially and physiologically. Losing too much on a portfolio means an investor might never recover. This is why knowing one’s risk tolerance is a must in 2022. With automated portfolio analytics, investors can find out their risk tolerance and financial condition.

There are several types of risks associated with investments. Liquidity, default, regulatory, and style risks are a few risks faced by investors. One cannot analyse all types of risks with manual analytics. With an automated solution, different risks can be analysed and avoided. Often, traditional analytics methods overlook market volatility and political factors that can determine a portfolio’s future. With automated portfolio risk analytics, one can know the macro and micro factors affecting ROI.

Conclusion

New-age portfolio analytics also consider internal factors that can impact the ROI. For example, a sudden change in management can hamper the ROI of an organisation. Modernise portfolio analytics to drive performance in 2022!

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