Portfolio analytics can be a game-changer for improving investment strategies and understanding risk. However, many professionals feel hesitant about diving into portfolio analytics, especially if they don’t have a quantitative or technical background. The good news is that getting started with portfolio analytics is more accessible than ever, and you don’t need to be a data scientist to benefit from it.
Here’s how you can start incorporating portfolio analytics into your decision-making process without needing a PhD in mathematics or finance.
The first step in using portfolio analytics is understanding what specific questions you want to answer. Are you looking to assess risk, track performance, or optimize asset allocation? By identifying the metrics that matter most to you, you can avoid getting overwhelmed by the flood of data and tools available.
For example, key performance indicators (KPIs) like volatility, Sharpe ratio, or max drawdown are metrics that can give you quick insights into how your portfolio is performing without diving deep into complex math.
At Kiski, we often advise clients to start by focusing on a few core metrics that directly align with their goals. By keeping it simple at the start, you can gradually build up your understanding as you gain confidence.
Gone are the days when advanced analytics were limited to those with programming skills.
Various tools and purpose-built analytics solutions allow you to visualize trends, track progress, and spot risks with minimal technical knowledge. Some, like the ones we’ve worked on at Kiski, are designed with usability in mind, so that professionals in non-quantitative roles can easily access and understand key insights.
Portfolio analytics revolves around two fundamental concepts: risk and return. While these ideas can get very complex, the basic principles are straightforward. Return is how much you’ve earned on your investments, and risk is how much volatility or potential loss is involved in achieving those returns.
Even without a quant background, you can start analyzing portfolios by understanding the relationship between risk and return and how they impact each other. A simple example is the Sharpe ratio, which measures how much return you’re getting for a certain amount of risk. Higher Sharpe ratios typically indicate better risk-adjusted returns.
At Kiski, we emphasize the importance of grasping these fundamental concepts when introducing clients to portfolio analytics. It’s not about learning every formula out there—it’s about knowing what the key ratios and figures mean and how they apply to your investment strategy.
Even if you’re just getting started, it’s important to know that you don’t need to go it alone. The internet offers many advisory services, education, or workshops tailored to non-quants. Engaging with experts can help bridge the gap and allow you to gain hands-on experience with real-world data.
At Kiski, we are committed to regular communication with our clients to provide the highest level of support. For example, a client might have a question about his portfolio, but is unsure what analytic would provide an answer, and how would the result be interpreted. This is where Kiski steps in and provides both guidance in what analytics are best to answer a specific question, and how to interpret the results.
We’ve designed solutions that simplify analytics for clients who want to leverage data without needing to understand every technical detail. Whether through consulting or technology, getting that support can fast-track your understanding and confidence.
Analytics can be overwhelming if you try to do everything at once. A good approach is to start with a smaller portion of your portfolio or focus on a specific area like performance tracking or risk management. Once you become comfortable with the tools and metrics, you can expand your analysis to cover more complex areas like asset correlations or scenario testing.
At Kiski, we encourage a phased approach—starting small and gradually building up to more comprehensive analyses. This ensures that analytics becomes a sustainable part of your investment process without being overwhelming.
You don’t need a quant background to take advantage of portfolio analytics. By focusing on what’s important, leveraging the right tools, and learning the basic concepts of risk and return, you can start making more informed investment decisions today.
Whether you’re just getting started or looking to enhance your current process, portfolio analytics is a powerful way to gain insights and optimize your strategy.
