In 2022, making investments is not as simple as it used to be. Organisations and individual investors have to go through several elements before investing. If they fail to do so, they could suffer a loss due to an unstable portfolio. To improve the portfolio’s health, organisations monitor them at all times. They depend on portfolio analytics to know the health of their portfolios and make better investment choices. Every investor wants to achieve financial flexibility in this era of uncertainty. However, achieving financial flexibility is not as simple as it seems. Continue reading to learn how high-end analytics can help investors tap into financial flexibility.
Understanding financial flexibility
Before learning about the importance of high-end analytics, investors should clearly understand the concept of financial flexibility. Financial flexibility helps investors respond to an investment opportunity that can offer higher returns. In other words, financial flexibility is defined as the ability of a firm to raise funds whenever needed. When a company invests, they need to think about emergency funds. An investment should also offer emergency funds if needed. There is no point in waiting for a year to fulfil an urgent financial obligation now.
A company that has achieved financial flexibility can meet future cash flow needs without any hassle. There is no panic within the company when a need for urgent funds arises. When market friction and volatilities increase, financial flexibility can help you fight them. However, several challenges stop organisations from achieving financial flexibility. Challenges that prevent organisations from achieving financial flexibility including the following:
- Currently, market disruptions can occur any time and disrupt the portfolio of an organisation. To achieve financial flexibility, organisations have to learn about market disruptions in advance. However, increasing uncertainties in the market have not made it easy for investors.
- Asset managers eventually learn to identify investments that can result in losses. Investing too much in depreciating assets can land an organisation in debt. Debt significantly hampers the cash flow and financial flexibility of an organisation.
- Financial flexibility is not achieved by only taking a small profit on your investments. Investors need to maximise returns for an asset. It can include passive investment options that can churn trading charges. However, asset managers struggle with finding the right time to trade an asset.
- Sometimes, when an organisation is on the route to becoming financially flexible, a sudden market disruption could set the organisation back significantly. There should be a backup plan in place to tackle sudden market disruptions. An organisation should invest in assets that can perform well across market conditions. For the same reason, organisations depend on portfolio analytics and try to become financially flexible.
Path to financial flexibility with high-end analytics
As discussed above, several challenges prevent organisations from becoming financially flexible. New-age portfolio analytics have the power to overcome these challenges. These are the ways high-end analytics can help in achieving financial flexibility in the 21st century:
- Investors need to become risk aware in this era of uncertainty. An investment should only be made after assessing future risks. The 21st century is seeing the use of new-age technologies to predict market risks. With high-end analytics, you can make the best use of available data and predict investment risks.
- High-end analytical insights can help investors with decision making. Before making an investment decision, all the external and internal factors are to be analysed. Doing all the analysis manually is not possible for asset managers. Due to this, technological solutions are used to perform investment research.
With deep insights, an organisation can build portfolio resilience. The risks faced by investors in 2022 may differ significantly from what they might face soon. This is why investors need to identify the top-performing assets to boost resilience. Financial resilience can help organisations collect emergency funds quickly. Achieve financial flexibility and portfolio resilience in the 21st century with new-age portfolio analytics!