A three-dimensional look at investment funds

Do you know how to pick great stocks?

At some point everyone tries to save some money for a reason. This could be a holiday, a house, a new car or simply to get a feeling of financial safety. A few years ago, the most common thing to do would be to leave it in a bank account and let your money accumulate interest over the years. You would then have a sizeable amount saved. Unfortunately, with banks offering around 0.1% interest these days, this is no longer a viable option. Many people choose to invest their money. Index investment funds are a popular way of investing in a variety of different companies at once, mitigating the risk (and high costs) of traditional stock investments.

There are countless investment funds available and this blog is not investment advice – so if you want to start investing you should search on the web for more information. This post however, is meant to demonstrate how you can use VRBI for analyzing stock data.

Investment funds

For this example, we’ve chosen funds from the Nationale Nederlanden. You can find the funds here. The funds all have a different name and four categories: exchange rate, yield, risk and Morningstar rating. The rate is obvious, it means the current value of one share in this fund. The yield means the average yearly yield per share (in percentages) for the past 12 months. The risk is calculated with mathematical algorithms and is categorized 1 to 7 for each fund. Seven is high risk and one is low risk. The Morningstar rating is a model of scoring funds, based on price and adjusted for risk and costs. This model also awards scores, with 5 being high and 1 being low.

Now that we know what all the terms mean we can start by inputting all the data. VRBI works with X, Y, Z, ball size, color and label. Each parameter can get a different value. We want to make the graph easy to read so it is best to use X for the exchange rate, Y for the yield and Z for the risk. This is the way 2D graphs would be structured traditionally, but with the Z-dimension as a third. The ball size can create a fourth dimension in VRBI. This will represent the Morningstar rating. A larger ball size will correlate with a higher rating, as would be expected. Color is optional but can be used to create another dimension or simply to show difference between data types.

When we enter the data, it looks like this (click and drag to view the actual graph):

VRBI Investment fund 3D graph

Analyzing the data

The result is a unique kind of graph which can be used to analyze the funds or to visualize it for others. As you might expect, the highest risk funds have the highest yield – but there are some funds that have a low, or even negative yield. It can go both ways but, in this example, risk does pay off. It’s also interesting to notice that the funds with the highest Morningstar rating are clustered together. They have good yields, but they top off around 10%. They are also clustered around €35 value and there is generally less variance between them. The following tips may help you in the future when making your own investments.

  • Do your research. Be sure to check the yearly yield. Between 5-15% are common numbers, with 5% being a safe bet and 15% a risky one. Anything above that is dangerous.
  • Not every fund does well all the time so be sure to compare them to others. Risk ratings and Morningstar ratings can help you decide if you are uncomfortable with decision making.
  • Be sure not to invest all your money in one fund. If you are just starting out, it’s okay to pick one. But try to spread it out over the months to mitigate risk. Dollar averaging is a popular and safe method of investing.
  • Don’t sell off and re-buy. This is stock trading and not investing. It will most likely cost you money. Transfer fees and losses add up quickly.
  • Don’t check on your investments all the time. Let them grow. You are in it for the long term. If you want a quick buck, look elsewhere.

This may be obvious to seasoned investors, but not for everyone, so please keep this in mind.

I hope this helps some people. Of course, this is just one of the possibilities VRBI offers. Next time we will cover a topic related to the insurance sector. This will be even more uniquely. If you want to help VRBI gain more attention, please remember to follow us on Twitter. Gaining an audience is immensely important for us. You can also share our tweets, or this blog post, directly to people that find this interesting. Remember that the demo is free to download here. When the new version of VRBI gets released, we will also update the demo accordingly. Feedback or questions are always welcome.

By |2018-03-31T19:33:13+00:00March 28th, 2018|VRBI|0 Comments