Investing is tricky. Everyone from experienced retail investors to venture capital professionals will tell you that there are loads of variables to consider. You need to understand the market and know everything about the company to be able to correctly evaluate the stock. One way to enable yourself to do this is by buying accurate data from reputable sources. Here is what you need to know about buying data for investment decision-making.
How can buying data boost investment decisions?
The success of investment decisions depends highly on the availability and accuracy of information. Investing always takes place in the absence of perfect information since no one knows everything there is to know that can affect the outcome.
However, constantly improving on the knowledge one works with is the best way to mitigate risks. Here is how buying data can help with this task.
- Buying data increases the scope of different variables that are accounted for. In simple terms, the basic data that investors traditionally work with revolves around the financial stance of the company. Many signals exist not reflected in such data, however, about the future prospects of the company. Thus, looking at online customer behavior or firmographic data on the company, to give just two examples, can significantly broaden our view of the firm.
- The data that is bought can be structured differently to suit various requirements. Datasets that come from data providers can be parsed, semi-structured, or structured in different formats. Or it can be raw, just like the data that investors would collect themselves. This gives investors the opportunity to choose which level of structuring they need for their current investment research project.
- Buying data increases the quality of the datasets investors already possess. Integrating original datasets with additional ones acquired from a trusted provider will help to fill in the gaps and correct errors.
- Getting the readymade datasets boosts efficiency. Investors have to act fast, thus, the sooner they can look at the information, the better. Buying data and moving straight to analysis gets the insights extracted much sooner than they would be if data had to be collected first. Thus, the value of the insights does not decrease before they are put into action.
How to buy what you need?
Investment firms and even many individual investors will have to buy data at some point as their portfolio value rises. The higher the stakes, the more important it is to have accurate information. Thus, the real question is how to make sure that you buy precisely what you need.
Firstly, you need to clarify the questions you want to answer through data analysis. Then think about what pieces of information you need to have to be able to answer those questions. If you are not sure about the particular data types, consult the professionals from which you are considering buying.
This brings us to the second point. Pick your provider wisely based on their experience, level of service, and reputation. Buying the right data is all about finding a trustworthy provider who can ensure data quality and advise you on how to choose the datasets.
Furthermore, in investment decision-making, both current and historical data are necessary. The former will tell you about the current market circumstances and firmographic features of the company in question. The latter will inform you about market trends and historical tendencies that will put things in perspective.
Finally, buying data for investment is in itself a form of investing. With it, you invest in knowledge that will bring you profit in the future. As with all investments, diversification of the portfolio is crucial. Thus, diversify your data portfolio by trying out different datasets. After all, venture capital is all about readiness to try new things and see where they take us.
When is the time to buy data?
A recent study suggests that data should be bought in batches in the decision-making stage. For investors, this means that it is not optimal to collect data at the same pace throughout the whole process of investment analysis.
Instead, you get the most value from buying data when you purchase it when the time to make the decision is approaching. This way, you also largely avoid problems stemming from data decay.