By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
SmartData Collective
  • Analytics
    AnalyticsShow More
    predictive analytics in dropshipping
    Predictive Analytics Helps New Dropshipping Businesses Thrive
    12 Min Read
    data-driven approach in healthcare
    The Importance of Data-Driven Approaches to Improving Healthcare in Rural Areas
    6 Min Read
    analytics for tax compliance
    Analytics Changes the Calculus of Business Tax Compliance
    8 Min Read
    big data analytics in gaming
    The Role of Big Data Analytics in Gaming
    10 Min Read
    double,exposure,of,abstract,virtual,statistics,data,hologram,on,modern
    The Surprising Benefits of Data Analytics for Furniture Stores
    8 Min Read
  • Big Data
  • BI
  • Exclusive
  • IT
  • Marketing
  • Software
Search
© 2008-23 SmartData Collective. All Rights Reserved.
Reading: Promising Benefits of Predictive Analytics in Asset Management
Share
Notification Show More
Latest News
ai software development
Key Strategies to Develop AI Software Cost-Effectively
Artificial Intelligence
ai in omnichannel marketing
AI is Driving Huge Changes in Omnichannel Marketing
Artificial Intelligence
ai for small business tax planning
Maximize Tax Deductions as a Business Owner with AI
Artificial Intelligence
ai in marketing with 3D rendering
Marketers Use AI to Take Advantage of 3D Rendering
Artificial Intelligence
How Big Data Is Transforming the Maritime Industry
How Big Data Is Transforming the Maritime Industry
Big Data
Aa
SmartData Collective
Aa
Search
  • About
  • Help
  • Privacy
Follow US
© 2008-23 SmartData Collective. All Rights Reserved.
SmartData Collective > Analytics > Predictive Analytics > Promising Benefits of Predictive Analytics in Asset Management
Predictive Analytics

Promising Benefits of Predictive Analytics in Asset Management

Predictive analytics software can help investors manage their financial assets more effectively.

Arthur Tereshchuk
Last updated: 2023/02/14 at 10:07 PM
Arthur Tereshchuk
11 Min Read
analyst,women,looking,at,kpi,data,on,computer,screen
Shutterstock Licensed Photo - 1813787411 | by Andrey_Popov
SHARE

Artificial intelligence technology has massively disrupted the financial sector. Joe McKendrick posted an article in Forbes on the role that AI will play in the coming democratization of financial services.

Contents
What is asset allocation and how can predictive analytics improve its effectiveness?How do I use predictive analytics to improve my asset allocation strategy?What are the different types of assets in your portfolio that predictive analytics can help manage?Should I use financial software that uses predictive analytics to help with asset allocation?Are there any risks associated with asset allocation?Take your portfolio to the next level with asset allocationPredictive analytics is the future of financial asset management

There are many other reasons AI and big data technology is changing finance. One of the biggest is that more financial institutions are using predictive analytics tools to assist with asset management. Predictive Asset Analytics, Riskalyze and Altruist are some of the tools that use predictive analytics to improve asset management for both individual and institutional investors.

This article will provide an overview of the concepts of asset allocation and fixed asset management, before delving into some of the unique benefits afforded by predictive analytics technology.

What is asset allocation and how can predictive analytics improve its effectiveness?

You’ve probably heard of the old adage, don’t put all your eggs in one basket. Asset allocation is taking this advice and applying it to your investments. Not only can it help you build a profitable portfolio, but it can also provide a degree of protection for your future.

More Read

predictive analytics in dropshipping

Predictive Analytics Helps New Dropshipping Businesses Thrive

AI Tools Make Short-Selling Possible with Algorithmic Trading
4 Data Analytics Tools for Property Market Valuations
Albanian Bitcoin Investors Tap the Power of Predictive Analytics
Predictive Analytics Improves Trading Decisions as Euro Rebounds

Asset allocation is a strategy that divides your money between different asset classes in your portfolio. Counteracting volatile investments with less volatile ones increases your stability and chances of generating greater returns overall.

The good news is that predictive analytics technology is making it easier for people to boost their ROI and tweak their portfolios to align with their investment goals. Brad Fisher a Partner and Data & Analytics Lead for KPMG has talked about some of the advantages that predictive analytics plays.

“In today’s challenging business environment, it is not enough to do an average job managing fixed assets. Enabling technology and people skilled in interpreting data have resulted in a convergence where predictive analytics can and should be an integral part of most, if not all, business operations,” Fisher writes.

How do I use predictive analytics to improve my asset allocation strategy?

Predictive analytics technology can help optimize your profile to better meet your investment goals. However, if you don’t establish clear, objective goals in the first place, then you won’t benefit from utilizing predictive analytics.

Before you can create a strategy, you must determine your risk tolerance. Finding the right balance between risk and reward is all about your establishing personal investment goals. So you have to ask yourself, how much volatility are you comfortable with? Ultimately, the decision of how to allocate your funds is personal, and there is no right or wrong answer.

Once you have outlined your risk tolerance, you will have an easier time using predictive analytics tools to improve your asset allocation strategy. This means you need to consider the following two factors. Here are the two factors that you need to take into consideration when using predictive analytics to improve your portfolio management strategy.

●             Time Horizon

The time horizon boils down to what your short-term and long-term goals are. Will you need the money you’re investing within the next year or ten years from now? You may find that your age can play a big part in your answer to that question. For example, a young investor might not need their saved-up money for some time, while an older investor who is retiring soon may want to access it in the near future.

Adversely, age might not play a role at all. Let’s say you want to take an expensive vacation this year and need the money within the next six months. In that case, you have a short time horizon.

Predictive analytics tools like Predictive Asset Analytics by AVEVA will take the timeframe of your investing decisions into consideration. The AI algorithms will evaluate the likely performance of assets over various time intervals and discount any outcomes outside the desired timeframe.

●             Risk Tolerance

Your risk tolerance is how much you’re willing to risk losing to potentially get a greater return. Do you prefer to play it safe or put it all on the line? There are a few things to consider when weighing your risk tolerance. Someone that is just starting out and has a small amount of money but more time to play with may be more willing to make volatile investments. They want to build their portfolio and have years to rebound from any losses. Someone in the later stages of life may not want to take such a big roll of the dice.

Predictive Asset Analytics and other predictive analytics applications for asset management will evaluate the probable volatility of various market conditions to assess the risk of making short-term and long-term investments during those periods.

Last year, Xiafei Li and his two colleagues in China published a study in the Annals of Operations Research on the ability to forecast stock market volatility with predictive analytics models. Their research showed that economic policy uncertainty indicators and CBOE volatility index (VIX) indicators are better for predicting market volatility than financial indices. Therefore, these metrics are likely to be used by most predictive analytics tools used to ascertain risk.

As you can see, these two factors play off of each other and predictive analytics technology can help manage them more easily. Your time horizon will likely influence your risk tolerance and vice versa. It’s all about determining what will work best for you. Predictive analytics tools like Riskalyze and Altruist will help with portfolio management, but you still have to establish your goals first.

What are the different types of assets in your portfolio that predictive analytics can help manage?

So, you’ve set your personal investment goals, and you know where you stand regarding what’s important to you. You have also invested in new cutting edge software that uses predictive analytics to help manage your portfolio better.

What’s the next step? You want to look at the types of assets and how they will comprise a diverse portfolio. While there are a growing number of classes, the following are the main categories.

●             Stocks

When you purchase a stock, it represents your share of the company you invested in. It can be the riskiest investment you make, but it can also have the biggest returns. Its volatility depends on many factors, including the company’s performance, the economy, and the political environment. Due to its unpredictable nature, it’s generally recommended you hold stocks for five years or longer.

●             Bonds

Bonds involve lending money to a company or government entity for a set period of time. The company or entity will then pay you back your investment plus interest. Overall, they are less volatile than stocks and a great diversification asset that can help balance your portfolio. They offer stability, but the returns probably won’t be as great as stocks long term.

●             Cash Equivalents

Cash equivalents are meant to be held short term, typically a year or less, and include certificates of deposit (CDs), treasury bills, and bankers’ acceptances. They are the most liquid asset, meaning you can tap into them anytime with little or no penalties. They are one of the lowest-risk investments and tend to have minimal returns.

●             Real Estate/Tangible Assets

Real estate and other assets such as livestock, gold, and silver can be used in investment strategy. They have a low correlation to market movement and typically perform well during rising inflation, which helps offset risk in a portfolio.

Predictive analytics software can help with managing all of these assets.

Should I use financial software that uses predictive analytics to help with asset allocation?

The easiest way to manage your asset allocation is with financial software. Sites like Stock Market Eye take all of the guesswork out of investment portfolio reporting. Many of these tools also use predictive analytics to forecast future asset prices with their valuation models.

They break down every aspect into allocation reports, transactions, gains, losses, and returns. You can even view what your portfolio looked like on a specific day with their Back-In-Time Report feature.

Are there any risks associated with asset allocation?

Investing is a venture that comes with a degree of uncertainty, but asset allocation can help you better understand how to take calculated risks. What level of risk, of course, is entirely up to you and what you want out of your experience.

Take your portfolio to the next level with asset allocation

The role of asset allocation in portfolio management is all about risk versus reward. Creating a diverse portfolio with uncorrelated assets can balance your volatility and potentially increase your returns. Are you ready to take your investments to the next level?

Predictive analytics is the future of financial asset management

There are tremendous benefits of using predictive analytics technology for asset management. We previously pointed out that predictive analytics software can help Forex traders, but other investors can benefit from it as well. You will want to familiarize yourself with the benefits of AI and use it to your advantage.

TAGGED: analytics in finance, analytics in investing, predictive analytics
Arthur Tereshchuk February 14, 2023
Share this Article
Facebook Twitter Pinterest LinkedIn
Share
By Arthur Tereshchuk
Follow:
Arthur is a writing mercenary experienced in copywriting, creative writing, and academic writing. He currently works as a Content Creator at OTAKOYI and writes about tech, business, and UX/UI design. You can find him on LinkedIn.  

Follow us on Facebook

Latest News

ai software development
Key Strategies to Develop AI Software Cost-Effectively
Artificial Intelligence
ai in omnichannel marketing
AI is Driving Huge Changes in Omnichannel Marketing
Artificial Intelligence
ai for small business tax planning
Maximize Tax Deductions as a Business Owner with AI
Artificial Intelligence
ai in marketing with 3D rendering
Marketers Use AI to Take Advantage of 3D Rendering
Artificial Intelligence

Stay Connected

1.2k Followers Like
33.7k Followers Follow
222 Followers Pin

You Might also Like

predictive analytics in dropshipping
Predictive Analytics

Predictive Analytics Helps New Dropshipping Businesses Thrive

12 Min Read
ai drives benefits of algorithmic trading
Artificial Intelligence

AI Tools Make Short-Selling Possible with Algorithmic Trading

13 Min Read
real estate and big data
Analytics

4 Data Analytics Tools for Property Market Valuations

8 Min Read
predictive analytics helps Albanian bitcoin investors
Blockchain

Albanian Bitcoin Investors Tap the Power of Predictive Analytics

9 Min Read

SmartData Collective is one of the largest & trusted community covering technical content about Big Data, BI, Cloud, Analytics, Artificial Intelligence, IoT & more.

ai is improving the safety of cars
From Bolts to Bots: How AI Is Fortifying the Automotive Industry
Artificial Intelligence
giveaway chatbots
How To Get An Award Winning Giveaway Bot
Big Data Chatbots Exclusive

Quick Link

  • About
  • Contact
  • Privacy
Follow US

© 2008-23 SmartData Collective. All Rights Reserved.

Removed from reading list

Undo
Go to mobile version
Welcome Back!

Sign in to your account

Lost your password?