Stock portfolio

You are not rich but have some savings? Want to increase it? Bank deposits have too low interest rates. Investing into stocks might be a better idea. So, how do you get started?

Thousands of companies are traded publicly. You can buy part of a company by buying its stocks. However, putting all your money into one stock can be risky. If the company fails you will lose your savings. People often prefer buying several stocks to make a profitable, diversified stock portfolio with acceptable risk. So, how do you build your stock portfolio?

You can go to a financial adviser and pay for advice or rely on your education and intuition. After all, only you will be responsible for your stock investment decision. At that moment any additional information will help. FAStocks.com is a free and easy to use website where you can evaluate and analyse your stock portfolio in seconds. FAStocks.com collects historical stock prices from web feeds and evaluates optimal fractions of assets using a modern portfolio theory.

Modern Portfolio Theory

Well, the stock portfolio theory is not really modern. It was modern years ago and now it is classic. Harry Markowitz described his portfolio theory in 1952 and, eventually, won a Nobel Prize. There is a lot of information about the Modern Portfolio Theory on Wikipedia.

The theory extensively utilizes a concept of a beta coefficient. The beta coefficient indicates the correlation of the stock price with the whole market. For example, the beta coefficient of 1 means that the stock price changes exactly in the same way as the market index price like the S&P 500 index. If S&P 500 goes up and beta >1 then the stock price will grow up even higher but if beta <0 then the stock price will fall. When we talk about correlations we talk about historical prices. No one can predict the future.

Beta coefficient multiplied by the market return is called expected return of the asset. In fact, the expected return is the stock price in the future subtracted by the stock price today. The expected return is an estimation. The real stock price varies in time which is called volatility. Volatility is a measure of risk that you take expecting a return. With the Modern Portfolio Theory you can maximize the ratio of the stock portfolio expected return to the stock portfolio volatility.

Stock Portfolio Optimization

It is all about tradeoff. For an exceptional good look, you spend extra time in the gym or with a hairdresser. For fuel economy you sacrifice the horsepower of your car or vice versa. We do optimization all the time. Mathematics has algorithms for that. The first step is problem definition; the second step is solution optimization. In the stock portfolio optimization problem your goal is to increase the return and reduce the risk. You maximize the ratio of the expected return to the return rate volatility.

The brute force approach to the stock portfolio optimization problem is searching through all the possible solutions looking for the best one. That is a very long and ineffective process. There are smarter algorithms which do not waste time searching for the solution in hopeless areas. The optimization algorithm starts from the exploration of a wide area but soon quickly narrows to the areas where the optimal solution sits. How can that be? Look at the birds. Birds flock around until one of it finds an area with some food. The flock follows that bird and starts exploiting the area by looking for a food rich region. There are examples in genetics where species mutate until they fit the environment and then, only the strongest survive. FAStocks.com uses advanced optimization algorithm which guarantees you the global optimal solution for the stock portfolio optimization problem.

Go to FAStocks.com

How to estimate your stock portfolio? There are four ways:

1. Software on your PC. That is what experienced traders use. Software is good, except that it is expensive, linked to your PC, and you need to learn how to use it. 

2. Excel spreadsheets. Oh yes, lots of people use that. Spreadsheets look familiar and seem inexpensive (excluding the hidden cost of Excel) but always involve plenty of copy pasting and boredom. 

3. Matlab. Don't go there. Only if you are a technical geek who likes writing scripts, like us, and for some reasons have a Matlab license. This is also true for any general purpose math software. 

4. Web site. Yes! But how many websites for portfolio optimization do you know which are free and easy in use? We know only one. You are right, we are talking about FAStocks.com. FAStocks.com will work on your iPhone, iPad, and any other mobile device that you have.

FAStocks.com is optimized to be easy to use. Companies are grouped by categories and can be accessed either with a scrolling menu or a search box. Detailed portfolio information is summarized on a separate page which is printer friendly. Everything is preset at optimal values, so there is no need for you to bother with the settings.

At FAStocks.com you can find your best stocks to buy. Compare different stocks by building the stock portfolio. Look for the combinations with maximum score. Do not buy stocks with minimum shares in the stock portfolio.