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The goal of this app is to create a portfolio of popular funds which minimizes volatility for a given average annual return selected by the user.

The app achieves this goal by traversing the space of all possible portfolios and selecting a combination of funds which minimizes volatility for a given average annualized gain.

 

For example, consider the following graph and assume A, B and C represent funds in which you are considering to invest.  Both A and B fluctuate somewhat, but if they are properly combined (say, with equal weights), then the portfolio experiences almost no volatility while it enjoys the same average return. This is because, A and B are negatively correlated. 

evolution_pricesABC.png

The concept of combining funds in order to minimize risk and attain maximum return is not new. In fact, it was proposed by Dr. Harry Markowitz in 1952 when he created the modern portfolio theory (MPT) to help investors match their risk tolerance with their reward expectations in order to create their ideal portfolio.

However, the amount of computation involved in calculating the optimal portfolio given a level of risk tolerance is non-trivial and until recently it required at least a desktop computer. More importantly, these types of computations are typically done as a service by money managers for a fee that is proportional to the value of the portfolio.
 

The goal of this app is to enable any user to design their own portfolio and re-balance as required. All you need to do is to observe the risk/reward graph presented in the app and select the level of risk/reward that you are suits you. The app then conveniently calculates the optimal portfolio which achieves the goal.

For example, consider the following screenshot. The graph at the bottom of the screen shows the volatility vs. return. Specifically, the app has pre-computed the maximum return that can be achieved for a given degree of volatility. As you can imagine, there are infinite number of combination of funds and finding the one that achieves this goal is computationally complex. The app uses an efficient AI algorithm to make this computation possible on your device at reasonable time (this computation is done the first time that you launch the app and every time that you make a change in the settings tab of the app).

Simulator Screen Shot - iPhone 11 Pro Ma

Once the user make a risk/reward selection (by tapping on the bottom graph), they can also observe how that portfolio would have performed in the past decade and compare the optimal portfolio in terms of fluctuation and return with the two extreme portfolios of maximum return and minimum volatility. This is shown in the following screenshot.

Simulator Screen Shot - iPhone 11 Pro Ma

Disclosure: Nothing in this app should be considered investment advice. Past performance is not necessarily indicative of future returns. You should direct all investment related questions that you have to your financial advisor.

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