Using a Portfolio Optimizer offers several benefits for investors. Portfolio optimization involves finding the best combination of allocation to assets, taking into account factors such as peak-trough risk, volatility risk and diversification. The main advantages of using a stock portfolio optimizer are:
- Maximizing returns while minimizing risk: The goal of portfolio optimization is to achieve the highest possible returns given a specific level of risk. By using statistical and mathematical models, the portfolio optimizer analyzes historical data to identify the optimal asset allocation that can provide the best risk-adjusted returns.
- Efficient asset selection: The portfolio optimizer screens your selection of instruments to identify which ones are ideal for long-term investing. It helps you discover good investment opportunities by running the optimizer across more than 100 built-in portfolios representing investment themes and sectors.
- Allocation efficiency: The portfolio optimizer determines the appropriate allocation for each instrument in your portfolio, aiming to improve risk-adjusted returns. It identifies the right allocation that optimizes the overall performance of your portfolio.
- Elimination of human biases and emotions: The portfolio optimizer relies solely on mathematics and statistical models, eliminating human biases and emotions such as fear and greed. This approach ensures a more objective and data-driven decision-making process.
- Fund manager’s favourite tool: Portfolio optimizers from various vendors, such as BloombergTM and ReutersTM are widely used by fund managers as they help them in constructing efficient portfolios and rebalancing them in a timely manner.
- Personalized notifications: Portfolio optimizer allow you to save up to 10 different portfolios. These are automatically screened for optimisation every week and an email notification is sent to subscribers highlighting if the portfolio requires to be rebalanced. This enables investors to always be informed of changes in the market and not miss the right time for rebalancing their portfolios.
- Detailed analysis: A Portfolio optimizer provides charts and detailed information on return percentages, prices, and periodic risk-returns. These visualizations and data help you study and understand the performance of your optimized portfolio and it’s constituents better.
It’s important to note that portfolio optimization is not fool-proof and cannot guarantee returns or eliminate all risks. Investors should still exercise caution, conduct thorough research and consider other factors before making investment decisions.