Friends, today I am presenting a curtain raiser to the Portfolio Management using Statistical analysis and techniques which I am following.
An investment is made with an objective of achieving long term goals confidently. However the volatility of the market impact the Portfolio return and make it quite difficult to ascertain the attainment of objective.
For example, for a long term goal of Kid education due in 10 years from now, assuming current PF investment of Rs. 10 lakhs and PF return of 12%, what is the probability that Portfolio will generate the expected return of Rs 3,105,848?
| Decision | |
|---|---|
| Portfolio factors | variables |
| Assuming Amount Invested | ₹1,000,000 |
| Assuming Expected PF Rate of return p.a. (%) | 12.00% |
| Time (years) | 10 |
| Total expected return of VK PF | ₹3,105,848 |
With reference to the portfolio statistical data collected over time:
| PF | Mean | stddev | |
|---|---|---|---|
| Investments | return | return | risks |
| VK PF - 2020 | 14.59% | 14.59% | 7% |
Applying MonteCarlo Simulation technique, The current PF Mean = 14.59% and Std. Deviation = 7%, the probability to achieve expected return of Rs. 3,105,848 and above is equal to = 64.82%.
Conclusion: To continue with the current Portfolio allocation and its constituents.
Link to analysis: VK PF Performance Graph
Thanks for your time.
Vijay Kiran.