Opinion | In the age of data overdose, what’s relevant to you?3 min read . Updated: 15 Oct 2019, 10:18 PM IST
Data becomes useful information only when you put it to productive use
Every day, and every hour, we are hit by some data point. It could be through the morning newspaper, television channels running “breaking news" throughout the day, a mobile app, a WhatsApp forward, a post in other social media, or a conversation with your friend or colleague. We are calling it data as it is not information yet; it will become information once you process it as per your requirements. Every data point is useful in some way to someone, but every individual is different and your requirements are unique to you. Hence, you have to think through which data points are relevant for you, and de-clutter your mind space. Data becomes useful information only when you put it to productive use.
There are broadly two sets of data points. One, which come every day on a routine basis. Two, events that happen occasionally and are relevant or seemingly relevant. Apart from these two, there are opinions voiced by various people, experts and non-experts, in the media and social media. Let’s start with the routine data points. To get a basic sense of the market, you would track the Nifty, Sensex, 10-year government security yield, crude oil price, among others. If you want to dig deeper, you would track price-earnings ratio, price-to-book-value ratio, corporate earnings growth, among others. What is relevant here is, to what extent and depth you want to go and how much time you have. You set the bandwidth for yourself. If you are an investor and have assigned your money to a professional fund manager like a mutual fund or PMS (portfolio management service), then a basic sense of the pulse of the market would suffice. You may want to set a wider bandwidth, if you are managing your own portfolio or you want to have a deeper understanding. In that case, you have to know the purport of the data points you set for yourself. For example, generally, weakness of the Indian rupee against the dollar or other currencies is taken as a negative as it leads to “imported inflation". However, it may help certain export-oriented industries, your investments in feeder funds (mutual fund schemes in India that invest in funds abroad) and domestic price of gold, due to the conversion factor.
Coming to events, there are events that are significant and have some impact on your portfolio, and there are events that are not so significant but seem important, going by the headlines and discussions around you. As an example, the Union budget and the “follow-up budgets" are important as they impact your investments. An example of the second type is Brexit as it does not have as much direct impact on your investments in India. Though global markets have linkages and repercussions are felt all over the world, the context here is the extent to which it actually impacts you. The relevance of an event may not be as much as the discussion or noise around you, and vice-versa.
Hence you need to form your dashboard. Swans are called eclectic because supposedly they can separate milk from water and take milk only. Swan is the vahana (vehicle) of Saraswati, the goddess of knowledge. It implies that to acquire knowledge, you have to be eclectic, take the useful stuff, and forget the noise. On daily events, think through what all you need to track, and follow those data points. Importantly, know the impact of these on your investment portfolio. As an example, if you are tracking global interest rates and the amount of government bonds trading in negative yield, you have to be aware that global negative interest rates may influence interest rates in India downwards, but does not per se mean that interest rates in India will turn negative. On events, understand what is happening and analyse how it impacts your investment portfolio. If it is not material, de-clutter your mind and put your bandwidth to better use.
The other point we made is about opinions voiced in the media or social media. It is good to gain from someone’s viewpoint; it gives clarity to the events happening around us. However, do not let the negativity of these opinions darken your mind. Read the opinions from the perspective of whether they add value to you, or it’s being said just for the sake of saying something.
To summarize, clarity on what you want to track will help you reach better output from the plethora of inputs available.
Joydeep Sen is founder, wiseinvestor.in