Mitigating Risk: How Mixed Reality is Shaping Investment Management

Before we delve into the ways in which Mixed Reality, in particular, can help investors minimise the risks associated with investing; let’s take a look at which risks loom over investments at every given minute.

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q3 2020 hedge fund letters, conferences and more

Types Of Investment Risks

Market risk: the risk of investments declining in value due to economic, political or social developments that affect the market. The main types of market risk are equity risk, interest rate risk and currency risk.

A Look At The Portfolio Of Billionaire Charlie Munger

Charlie MungerCharlie Munger is one of the world's greatest investors. Over the past six decades, he's helped his business partner and friend, Warren Buffett, turn a struggling textile business called Berkshire Hathaway into one of America's largest firms. Q3 2020 hedge fund letters, conferences and more If you’re looking for value stocks, and


Equity risk: applies to investments in shares. The market price of shares changes naturally all the time according to supply and demand. The risk is the drop in the market price of shares.

Interest rate risk: applies to debt investments like bonds. The risk is losing money when interest rates go up, for example, in which case the value of bonds decreases.

Currency risk: applies to foreign investments. Movements in exchange rates generate risk.

Liquidity risk: the risk of not being able to sell an investment at a fair price and take your money when you want to. In some cases, it may not be possible to offload your investment at all.

Concentration risk: concentrating your investments in one type of investment or asset class generates risk. Diversification helps to spread the risk.

Credit risk: the risk that the issuer of the bond will become unable to pay the interest or principal of the bond at maturity.

Inflation risk: risk in losing the purchasing power of your returns because the value of your investment isn’t adjusted to changes in inflation.

Horizon risk: external unforeseen events might shorten your investment horizon. Such events might force you to sell your investments that you expected to hold on to. Selling when the markets are down risks losing money.

Foreign investment risk: investing in emerging markets can be wonderfully lucrative. But there are additional and different risks to look out for abroad, including social, political and economic.

The bottom line is, investment risk can cause grave losses arising from internal and external forces at any given moment. It’s no wonder that investment management dominates the financial services sector. But how will the management of wealth and investments change in 2020 and beyond?

How then, can investment management mitigate risk? Generally speaking, investments can be made safer by strengthening communication, having access to real-time information, automating processes, effective data analysis and the diversification of portfolios.

With these factors in mind, how can Mixed Reality (MR) enhance the ability of investment management in its quest for seeking out solid investment opportunities and minimising risk? Mixed Reality, in itself, is one of the most attractive technologies in the financial realm. That’s because it typically merges together the physical and digital worlds. It utilises human input as well as computer and environment interaction - much like the modern financial sector itself.

Mitigating investment risks with Mixed Reality

Mixed Reality (MR) combines both elements of Augmented and Virtual realities. No longer are we dealing with the application of one or the other. Today, mixed reality enables you to create a visualisation that recreates natural environments and brings real-time data to life. Within this MR environment, real-world and digital objects interact.

We already have a powerful computing interface, AKA the smartphone or PC, which gives us access to the data we actively search for on the internet. However, the immersiveness and capacity to interact with this data are limited by the rectangular screen as well as our willingness to search for information.

A mixed-reality interface combines different levels of real and virtual elements on the same display to generate immersive, interactive and highly useful experiences. Especially when it comes to investment and wealth management - which requires a constant flow of real-time data that can be manipulated to account for different investment scenarios.

Immersive data

The ability to visualise data as it comes in is an incremental tool for traders, investors and their management teams alike. Mixed reality can enhance the investment process by making it easier and faster to organise large amounts of data, manipulate them accordingly and visualise them in an easy-to-grasp way.

One of the best investment management strategies is to diversify your portfolio. This means a close eye will have to be kept on a number of different asset classes and their respective data flows. From stock prices to inflation rates and credit risks to the political climates of foreign countries where you may have an active investment. Visualising mass data makes it easy to make wise investment decisions when time is short and risks are looming.

One example of the application of virtual reality, in this case, is Salesforce’s use of Oculus Rift to create an immersive 3D environment, specifically built to visualise and analyse data. Fidelity Investments has also utilised the Oculus Rift technology to create a virtual world called “StockCity”- where stock portfolios are transformed into a virtual 3D city. Here, investors can see and immerse themselves in the data.

Mixed reality trading tools

Trading tools, once made exclusive to only professional investors and investment managers are now hitting the public allowing for virtual trading. The virtual technology has combined financial data with the tools necessary to make wiser investment decisions. Risks are digitally minimised in the absence of human error.

Some companies are making trading a virtual pursuit by establishing virtual reality workstations for trading in office environments. Citi bank uses Microsoft HoloLens to enable their traders to use the Holographic workstations. They essentially implement 2D and 3D elements that are used in conjunction with the banks’ existing processes.

Others have augmented the remote-nature of trading by creating digital apps that track investments and provide actionable insights into how to make them more lucrative. ARQ, for example, lets users connect investments and see how they perform based on mass quantities of data.

Mixed Reality and the future of managing investments

Tech-savvy financial advisors are already beginning to jump on the MR wave. They see the value of the technology in its ability to help engage clients as well as its capacity to speed up processes, provide data visualisation and minimise human error - all of which minimise risks associated with investments.

International events, market fluctuations and credibility of bond issuers can all be monitored in real-time, allowing for both contingency planning and ceasing investment opportunities. Individuals can also benefit from these technological applications. AR and VR in financial services allow clients to compare their own investments, as well as themselves to similar demographics to determine how they are performing relative to other investors.