Investing capital in a company that will bring benefits with a long-time horizon is always the top priority of any investor. Choosing the right project for investment is like starting to construct a building foundation. There are various parameters to consider before investing. One wrong move can result in loss of funds because we all know that business is a risk, and the market value is always up and down.
To thrive, investors need to understand big and fast-moving data to gain access to real-time insights and use them here and now.
Sergey Sartashov (Sergejs Kartasovs), investment management specialist, CEO of Generation Partners LTD, told us how an investor can competently work with information flows.
Using big data
Today, Big Data has become the backbone of the financial sector. Investors use big data analytics to find patterns in vast and ever-growing amounts of information. Using data to identify trends can generate high returns. Once you see a clear pattern regarding consumption habits, or for instance, supply and demand, you can make intelligent judgments. Detecting these trends at an early stage can bring you an excellent return on investment.
Sergey Kartashov believes that considering a rapidly changing large-scale information flow, it is important to know how to capture essential and reliable information. Having access to new types of data, along with knowing how to quickly collect and process it opens up new ways to spot investment characteristics such as dynamics, value, profitability, tendencies, and demand.
Big Data helps to objectively evaluate public companies around the world using fundamental and economically motivated investment aspects: financial statements, as well as market data such as prices, profitability, volumes, quotes, stocks, etc.
By studying and analyzing thousands of sources, trends, and market directions, an investor can select companies for investing.
After analyzing and processing the relevant information about potential applicants, it is necessary to audit the chosen companies and create an investment basket.
Sergey Kartashov notes that at this stage one should pay attention to the location and age of the company, and its staff. But it is much more important to analyze the following criteria:
- Management. Startups are often run by project founders or developers. It is important to involve professionals in managing a company.
- Business plan. Lacking a monetization plan is considered by investors as a frivolous and risky approach to doing business.
- A long-term development plan. It is a form factor for investment decisions. The company must understand the growth prospects for the coming years. Lack of vision, even with quality products and professional employees, scares off potential investors.
Risks and revenue
Sergey Kartashov believes that one of the key points to successful investment is knowing how to find a balance between comfort level and risk, considering the time. A way to balance risk and revenue in an investment portfolio is diversification: the distribution of the portfolio throughout multiple asset classes.
There are many profitable and at the same time extremely risky startups. Adding more fixed-income investments to the portfolio will slightly lower expectations for long-term returns but can significantly reduce the impact of market volatility. This is a compromise that many investors see as appropriate.