Making financial decisions can be a daunting task, especially if you're just starting out, but the same applies to even the most experienced. The simple answer is: You can't auto-pilot investing and expect to profit.
One way, however, that is changing the game for investors in particular is the availability of smart analytics, which gives indicators and data on all kinds of motives, allowing investors to make more informed decisions about their financial future.
Three important areas that may influence financial decisions
It is important to know that there are different types of investors, but the majority of investors have no real plan due to a lack of understanding of the financial scene. They essentially gamble instead of investing.
Risk tolerance
One of the fundamental factors in financial decision-making is an individual's risk tolerance. Traditional investors often opt for low-risk assets like bonds or diversified stock portfolios, while crypto enthusiasts may embrace the higher volatility of digital currencies.
Types of investing
The most common method of investing is setting aside a small sum, typically each month, and you invest in your chosen areas. Strategically, this is basic and with no real intent but can be profitable.
Next is lump sum investing (LSI), which is simply investing a large amount of funds into the market instead of gradually with the idea that the timing or price is right. Now, while this can pay off, it can also hurt the investor, as you are risking that the current price is ideal which in turn could also significantly drop, potentially causing profit issues.
Alternatively, you could use a method called dollar cost averaging (DCA). This is where you take previous price action and buy around a price you feel increases your chances of making more profits.
In short, you accumulate as cheaply as possible in an attempt to build a more profitable portfolio over a long timeframe.
Investor profiles
There are many different types of investors, and by this, we mean in terms of what they are buying and not how they are buying. Here are some common profiles:
- Traditional/safe: These are likely to invest in lower-risk assets like Bitcoin or Ethereum to steady their investments.
- Memecoins: This is an area unlike other investments, where they opt to buy tokens based on the meme aspect and hope to see unthinkable profits — but there is also a massive risk.
- Leverage: Investors can bet on a token rising or dropping in the hopes of making profits using leverage. This can be riskier but they have the potential to yield higher profit margins even with less deployed capital.
- Staking: This type of investor will buy tokens that they can stake, allowing them to store the tokens and gain more as a reward for staking.
- Trading: This is a form of investing, despite it appearing separate. The difference is the timeframes and frequency in which investments are executed. Trading is typically a shorter timeframe than most types of investing.
Smart analytics help to mitigate risk and give more informed decision-making. When compared to the stock markets, although smart analytics are available, the Web3 and crypto space is a whole different game with many more intricacies. The use of smart analytics helps you navigate these more demanding and unknown areas to further improve your overall investment decisions.
Three Areas Of Analytics That One May Want To Consider
- Social sentiment: This allows you to see what others are talking about and make a better-informed decision. Being able to track what is trending in terms of social aspects gives a better idea of what might be a good or bad investment.
- Token data and activity tracking: This allows you to see in-depth data based on each token to get a better idea about it. You can also track other wallets and investors.
- Charts and market trends: Knowing what is going on with charts to illustrate the latest trends and in-depth information on all kinds of tokens is one area that could change the trajectory of your investments.
The above areas are some examples you can consider to further improve your financial decision-making within the Web3 space using smart analytics. However, knowing the exact use cases on how you can utilize these is also important.
Examples of smart analytics in action
Liquidity data
Liquidity within the financial markets is an underrated area of interest as it could present prime patterns on which you can act and seize opportunities. Liquidity data can be a great indicator as to where the markets may be heading and it may give you the moment you need to act upon.
Price action alerts
Similar to liquidity above, many investors choose to deploy capital when prices are where they want them. Smart analytics allow you to track and be notified via alerts when price action meets your chosen criteria. Alternatively, you can use smart analytics to see previous price action and further help decide on what your next move is.
These are just two of many different use cases within the crypto and Web3 space being utilized by smart analytics and they demonstrate how important this area is when it comes to making more effective financial decisions.
Summary
When it comes to investing, particularly within the crypto space, using tools to your advantage is absolutely vital and can heavily impact your financial decisions if used correctly. This is where analytics come into play as they enable you to not only make more informed financial decisions — whether that be saving money or gaining more profits — but they also save you time and reduce the emotional strain.
Smart analytics are not just a tool. They can be a game changer in making more frequent and accurate financial decisions. If you're not leveraging analytical information, then you could be missing out on a critical area of your financial future.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Ilias Salvatore is the brand/product lead of Flooz.xyz — the easy place to buy, trade and track crypto with real-time data and alerts.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.
Source: Cointelegraph.com
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